HomeMy WebLinkAbout102-Attachment A.pdfNEWISSUE–BOOK-ENTRYONLY RATINGS:____________________________________________
Moody’s:Aaa
S&P:AAA
(See“RATINGS”herein)
IntheopinionofHawkinsDelafield&WoodLLP,BondCounseltotheCity,underexistingstatutesandcourtdecisionsandassumingcontinuing
compliancewithcertaintaxcovenantsdescribedherein,(i)interestontheBondsisexcludedfromgrossincomeforFederalincometaxpurposes
pursuanttoSection103oftheInternalRevenueCodeof1986,asamended(the“Code”),and(ii)interestontheBondsisnottreatedasapreference
itemincalculatingthealternativeminimumtaximposedonindividualsandcorporationsundertheCode;suchinterest,however,isincludedinthe
adjustedcurrentearningsofcertaincorporationsforpurposesofcalculatingthealternativeminimumtaximposedonsuchcorporations.Inaddition,
intheopinionofBondCounseltotheCity,underexistingstatutes,interestontheBondsisexemptfromStateofCaliforniapersonalincometaxes.See
“TAXMATTERS”herein.
$11,995,000
CITYOFSARATOGA(SANTACLARACOUNTY,CALIFORNIA)
GENERALOBLIGATIONREFUNDINGBONDS,SERIES2011
(SARATOGACOMMUNITYLIBRARYPROJECT)
Dated:DateofDelivery Due:August1,asshownbelowTheCityofSaratoga(SantaClaraCounty,California)GeneralObligationRefundingBonds,Series2011(SaratogaCommunityLibraryProject)(the“Bonds”),arebeingissuedbytheCityofSaratoga(the“City”)pursuanttoArticles9and11ofChapter3ofPart1ofDivision2ofTitle5oftheCaliforniaGovernmentCode,commencingwithSection53550ofsaidCode(the“Act”);andaresolutionadoptedbytheCityCounciloftheCity(the“Council”)onJune1,2011(the“BondResolution”).See“INTRODUCTION–AuthorityforIssuanceoftheBonds.”TheproceedsoftheBondsareauthorizedtobeusedtorefundalloftheCityofSaratoga(SantaClaraCounty,California)GeneralObligationBonds,Series2001(SaratogaCommunityLibraryProject)(the“2001Bonds”)whichwereissuedintheaggregateprincipalamountof$15,000,000.See“PLANOFREFUNDING”and“ESTIMATEDSOURCESANDUSESOFFUNDS.”
TheBondswillbedatedandbearinterestfromtheirdateofdeliveryattheratesshownbelowuntilpaidinfull.InterestontheBondswillbepayableonFebruary1andAugust1ofeachyear,commencingFebruary1,2012.TheBondswillbeissuableasfully-registeredbondswithoutcouponsandwillberegisteredinthenameofCede&Co.,asnomineeofTheDepositoryTrustCompany,NewYork,NewYork(“DTC”).DTCwillactassecuritiesdepositoryfortheBonds.PurchasesofbeneficialinterestsintheBondswillbemadeinbook-entryformthroughDTCparticipantsandnophysicaldeliveryofBondswillbemadetopurchasers,exceptasotherwisedescribedherein.Paymentofprincipal,premium,ifany,andinterestwillbemadebyTheBankofNewYorkMellonTrustCompany,N.A.,asPayingAgent(the“PayingAgent”)toDTC,whichisobligatedtoremitsuchpaymentstoitsparticipantsforsubsequentdisbursementtotheBeneficialOwnersoftheBonds.SeeAPPENDIXC–“DTCANDTHEBOOK-ENTRYSYSTEM”herein.TheBondswillbeissuableindenominationsof$5,000oranyintegralmultiplethereof.
TheBondsaresubjecttoredemptionpriortomaturityasdescribedherein.See“THEBONDS–RedemptionoftheBonds.”
TheBondsweresoldbycompetitivesalepursuanttothetermsoftheNoticeInvitingProposalsdatedJune21,2011.
Thiscoverpagecontainscertaininformationforgeneralreferenceonly.ItisnotintendedtobeasummaryofthesecurityortermsoftheBonds.
InvestorsareadvisedtoreadtheentireOfficialStatementtoobtaininformationessentialtothemakingofaninformedinvestmentdecision.Capitalized
termsusedonthiscoverpagenototherwisedefinedshallhavethemeaningssetforthherein.
MATURITYSCHEDULE(BaseCUSIPNumber:803446C†)
$1,610,0004.00%TermBonddueAugust1,2031,Yield4.00%CUSIP803446CU5.
TheBondsareofferedwhen,asandifissuedbytheCityandacceptedbytheinitialpurchasers,subjecttotheapprovalofvaliditybyHawkins
Delafield&WoodLLP,BondCounseltotheCity,andcertainotherconditions.CertainlegalmatterswillbepasseduponfortheCitybyRichardTaylor,
Esq.,Shute,Mihaly&WeinbergerLLP,CityAttorney.HawkinsDelafield&WoodLLPalsoservedasDisclosureCounseltotheCity.Itisexpected
thattheBondsinbook-entryformwillbeavailablefordeliverythroughthefacilitiesofDTCinNewYork,NewYork,onoraboutJuly14,2011.
Dated:June29,2011.
†CUSIPdatahereinisprovidedbyStandardandPoor’sCUSIPServiceBureau,adivisionoftheMcGrawHillCompanies,Inc.CUSIPnumbersareprovidedforreferenceonly.
NeithertheCountynortheFinancialAdvisortakesanyresponsibilityfortheaccuracyofsuchnumbers.
MaturityDatePrincipalInterestPriceorCUSIP
(August1)Amount*RateYieldSuffix†_____________________________________________________2021$565,000$%3.00%%2.80%K72022580,0004.003.00L52023610,0004.003.18M32024630,0004.003.32N12025655,0003.503.50P62026685,0003.503.60Q42027705,0003.703.70R22028730,0004.003.80S02029760,0004.003.90T8
MaturityDatePrincipalInterestPriceorCUSIP
(August1)Amount*RateYieldSuffix†_____________________________________________________2012$455,000$%2.00%%0.35%A92013485,0002.000.60B72014495,0002.000.75C52015500,0002.001.00D32016475,0003.001.37E12017485,0003.001.75F82018500,0004.002.12G62019525,0004.002.44H42020545,0004.002.68J0
No dealer, broker, salesperson or any other person has been authorized to give any information or to
make any representations other than those contained in this Official Statement in connection with the offering
made hereby and, if given or made, such information or representations must not be relied upon as having been
authorized by the City. Neither the delivery of this Official Statement nor any sale hereunder will under any
circumstances create any implication that there has been no change in the affairs of the City since the date
hereof. This Official Statement does not constitute an offer or solicitation in any jurisdiction in which such
offer or solicitation is not authorized, or in which the person making such offer or solicitation is not qualified
to do so, or to any person to whom it is unlawful to make such offer or solicitation.
IN CONNECTION WITH THIS OFFERING, THE PURCHASER MAY OVERALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS
AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
No representation is made that past experience, as it might be shown by financial and other
information, will necessarily continue or be repeated in the future. See "FORWARD-LOOKING
STATEMENTS" herein.
THE BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION (THE "SEC") UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE
UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE PAYING AGENT AGREEMENT HAS NOT
BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE
UPON AN EXEMPTION CONTAINED IN SUCH ACT.
THE BONDS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY
STATE SECURITIES COMMISSION OR ANY REGULATORY AUTHORITY OF ANY STATE, NOR
HAS THE SEC OR ANY STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY OF
ANY STATE PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE
ACCURACY OR THE ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Statements in this Official Statement are made as of the date hereof unless stated otherwise and
neither the delivery of this Official Statement at any time, nor any sales thereunder, will under any
circumstances create an implication that the information contained herein is correct as of any time subsequent
to the date hereof.
In making an investment decision, investors must rely on their own examination of the security for the
Bonds, the City and the terms of the offering, including the merits and risks involved. Prospective investors
should not construe the contents of this Official Statement as legal, tax or investment advice.
CITY OF SARATOGA
Santa Clara County, California
CITY COUNCIL
Howard Miller, Mayor
Chuck Page, Vice Mayor
Jill Hunter, Council Member
Emily Lo, Council Member
Manny Cappello, Council Member
CITY STAFF
Dave Anderson, City Manager
Mary Furey, Finance and Administrative Services Director
Ann Sullivan, City Clerk
Richard Taylor, Esq., Shute, Mihaly & Weinberger LLP, City Attorney
FINANCIAL ADVISOR
Public Financial Management, Inc.
San Francisco, California
BOND AND DISCLOSURE COUNSEL
Hawkins Delafield & Wood LLP
San Francisco, California
PAYING AGENT
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.
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TABLE OF CONTENTS
Page
INTRODUCTION.......................................................................................................................................................1
THE CITY OF SARATOGA............................................................................................................................................1
AUTHORITY FOR ISSUANCE OF THE BONDS ................................................................................................................1
SUMMARIES NOT DEFINITIVE.....................................................................................................................................2
PLAN OF REFUNDING.............................................................................................................................................2
THE BONDS................................................................................................................................................................2
GENERAL ...................................................................................................................................................................2
REDEMPTION OF THE BONDS......................................................................................................................................3
ESTIMATED SOURCES AND USES OF FUNDS..................................................................................................6
DEBT SERVICE SCHEDULE...................................................................................................................................7
SECURITY FOR THE BONDS.................................................................................................................................8
PAYING AGENT AGREEMENT .....................................................................................................................................8
LEVY, TAX RATE AND ASSESSED VALUATION...........................................................................................................8
PAYMENT DATES AND LIENS ...................................................................................................................................10
TEETER PLAN...........................................................................................................................................................11
LARGEST TAXPAYERS ..............................................................................................................................................11
TAXATION OF STATE-ASSESSED UTILITY PROPERTY...............................................................................................12
DIRECT AND OVERLAPPING DEBT REPORT...............................................................................................................13
FACTORS AFFECTING PROPERTY TAX SECURITY FOR THE BONDS ...........................................................................15
CITY OF SARATOGA RECENT DEVELOPMENTS .........................................................................................................16
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.............16
TAX MATTERS........................................................................................................................................................19
FINANCIAL STATEMENTS..................................................................................................................................21
CERTAIN LEGAL MATTERS...............................................................................................................................22
ABSENCE OF LITIGATION..................................................................................................................................22
CONTINUING DISCLOSURE................................................................................................................................22
FORWARD-LOOKING STATEMENTS...............................................................................................................22
RATINGS...................................................................................................................................................................23
SALE OF THE BONDS............................................................................................................................................23
ADDITIONAL INFORMATION.............................................................................................................................24
AUDITED FINANCIAL STATEMENTS OF THE CITY OF SARATOGA
FOR FISCAL YEAR 2009-10 .........................................................................................................APPENDIX A
PROPOSED FORM OF OPINION OF BOND COUNSEL....................................................................APPENDIX B
DTC AND THE BOOK-ENTRY SYSTEM............................................................................................APPENDIX C
FORM OF CONTINUING DISCLOSURE CERTIFICATE..................................................................APPENDIX D
(THIS PAGE INTENTIONALLY LEFT BLANK)
OFFICIAL STATEMENT
$11,995,000
City of Saratoga
(Santa Clara County, California)
General Obligation Refunding Bonds, Series 2011
(Saratoga Community Library Project)
INTRODUCTION
This introduction is qualified in its entirety by reference to the more detailed information included
and referred to elsewhere in this Official Statement. The offering of the Bonds to potential investors is
made only by means of the entire Official Statement.
The purpose of this Official Statement, including the cover page and appendices hereto, is to
provide certain information concerning the sale and delivery by the City of Saratoga (the "City") of its
General Obligation Refunding Bonds, Series 2011 (Saratoga Community Library Project) (the "Bonds")
in the aggregate principal amount of $11,995,000.
The Official Statement makes reference to resolutions and to other documents and statutes. Such
references do not purport to be complete, comprehensive or definite and are qualified in their entirety by
reference to each such document.
This Official Statement speaks only as of its date, and the information contained herein is subject
to change. Except as required by the Continuing Disclosure Certificate to be executed by the City, the
City has no obligation to update the information in this Official Statement. See "CONTINUING
DISCLOSURE" and APPENDIX D – "FORM OF CONTINUING DISCLOSURE CERTIFICATE"
herein.
The City of Saratoga
The City of Saratoga is located in the County of Santa Clara (the “County”), 26 miles east of the
Pacific Ocean, ten miles southwest of San Jose and fifty miles south of San Francisco, and encompasses
an area of approximately 12 square miles. The City was incorporated in 1956 and is a general law city
pursuant to the California Government Code. The City has a Council-Manager form of government, with
five elected Council members served by a full-time City Manager and staff.
The 2010-11 assessed valuation of the City is $9,963,412,097. Upon issuance of the Bonds, the
Bonds will be the only City’s outstanding general obligation bonds. The total direct and overlapping
bonded debt of the City is $245,019,448 or approximately 2.46% of the 2010-11 assessed valuation.
For certain economic, demographic and financial information with respect to the City, see
Appendix A – “AUDITED FINANCIAL STATEMENTS OF THE CITY OF SARATOGA FOR
FISCAL YEAR 2009-10” attached hereto and “SECURITY FOR THE BONDS – City of Saratoga
Recent Developments” herein.
Authority for Issuance of the Bonds
The Bonds are being issued pursuant to Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of
Title 5 of the California Government Code, commencing with Section 53550 of said Code (the "Act") and
1
other applicable laws, and according to the terms set forth in the Paying Agent Agreement between the
City and The Bank of New York Mellon Trust Company, N.A., as paying agent (the "Paying Agent"),
dated as of July 1, 2011 (the "Paying Agent Agreement"), as authorized by the resolution adopted by the
Council on June 1, 2011 (the "Bond Resolution").
Summaries Not Definitive
Brief descriptions of the Bonds and the City are included in this Official Statement, together with
summaries of certain resolutions, documents and statutes. Such descriptions and summaries do not
purport to be comprehensive or definitive. All references herein to the Bonds and such resolutions,
documents and statutes are qualified in their entirety by reference to the actual documents, or with respect
to the Bonds, the form thereof included in the Bond Resolution, copies of all of which are available for
inspection at the offices of the Paying Agent at The Bank of New York Mellon Trust Company, N.A. 700
S. Flower Street Suite 500 Los Angeles, CA 90017.
PLAN OF REFUNDING
The Bonds are being issued to fully refund the $15,000,000 City of Saratoga (Santa Clara County,
California) General Obligation Bonds, Series 2001 (Saratoga Community Library Project) (the "2001
Bonds"). The 2001 Bonds were issued to improve, renovate, and expand the Saratoga Community
Library and to pay for costs of issuance of the 2001 Bonds. The 2001 Bonds were issued by the City on
May 9, 2001, pursuant to Chapter 4 of Division 4 of Title 4 of the California Government Code a
resolution of the City Council of the City authorizing the issuance of the 2001 Bonds. The 2001 Bonds
were approved by more than two-thirds of the electors of the City voting at a general municipal election
held in the City on March 7, 2000.
On the date of issuance of the Bonds, $12,235,000 of proceeds of the Bonds will be deposited
with and held in trust by The Bank of New York Mellon Trust Company, N.A., the paying agent for the
2001 Bonds (the "2001 Paying Agent"). The amounts deposited, together with other available moneys
held by the 2001 Paying Agent, will be sufficient for the 2001 Paying Agent to pay principal of and
interest on the 2001 Bonds maturing on August 1, 2011 and to redeem the remaining 2001 Bonds in full
on August 1, 2011. Funds held in trust by the 2001 Paying Agent will not be available to pay principal of
and interest on the Bonds. Upon the deposit of such proceeds and said moneys with the 2001 Paying
Agent, the 2001 Bonds will no longer be deemed outstanding.
THE BONDS
General
The Bonds will be dated their date of delivery and will mature at the times and in the principal
amounts set forth on the cover page hereof. The Bonds will be issued in denominations of $5,000 or any
integral multiple thereof ("Authorized Denominations"). Interest on the Bonds will be payable
semiannually on February 1 and August 1 of each year, commencing February 1, 2012. Interest on the
Bonds will be computed on the basis of a 360-day year of twelve 30-day months. For the debt service
schedule for the Bonds, see "DEBT SERVICE SCHEDULE" herein.
The Bonds will be delivered in book-entry only form and, when issued, will be registered in the
name of Cede Co., as nominee of The Depository Trust Company ("DTC"), New York, New York, which
will act as securities depository for the Bonds. Beneficial ownership interests in the Bonds may be
purchased by or through a Direct Participant (as defined in APPENDIX C – "BOOK-ENTRY ONLY
2
SYSTEM") in book-entry form, in denominations of $5,000 or any integral multiple thereof. Beneficial
Owners (as defined in APPENDIX C – "BOOK-ENTRY ONLY SYSTEM") of the Bonds will not
receive or have the right to receive physical delivery of certificates representing their ownership interests
in the Bonds. For so long as any purchaser is the Beneficial Owner of a Bond, such purchaser must
maintain an account with a broker or dealer who is or acts through a Direct Participant to receive payment
of the principal or interest on the Bonds. Payments of interest on, principal of and premium, if any, on
the Bonds will be made by the Paying Agent to DTC or its nominee, Cede & Co., as registered owner of
the Bonds. Each such payment to DTC or its nominee will be valid and effective to fully discharge all
liability of the City or the Paying Agent with respect to the principal or redemption price of or interest on
the Bonds to the extent of the sum or sums so paid. The City and the Paying Agent cannot and do not
give any assurances that Direct Participants or Indirect Participants (as defined in APPENDIX C –
"BOOK-ENTRY ONLY SYSTEM") will distribute to Beneficial Owners (i) payments of interest and
principal with respect to the Bonds, (ii) confirmation of ownership interests in the Bonds, or (iii)
redemption or other notices sent to DTC or Cede & Co., its nominee, as registered owner of the Bonds, or
that Direct Participants or Indirect Participants will do so on a timely basis. So long as the Bonds are held
in the book-entry only system of DTC, the registered owner, holder or Owner of the Bonds will be DTC,
and not the Beneficial Owner. See APPENDIX C – "DTC AND THE BOOK-ENTRY SYSTEM" herein.
Redemption of the Bonds
Optional Redemption. The Bonds maturing on or before August 1, 2021, are not subject to
redemption prior to their stated maturity dates. Bonds maturing on or after August 1, 2022, are subject to
redemption prior to their respective stated maturity dates, at the option of the City, from any source of
available funds, as a whole or in part on any date, on or after August 1, 2021 at the principal amount of
the Bonds called for redemption, together with interest accrued thereon to the date of redemption, without
premium.
Mandatory Redemption. The $1,610,000 Term Bond maturing on August 1, 2031, is subject to
mandatory sinking fund redemption on August 1 in each of the years and in the respective principal
amounts as set forth in the following schedule, at a redemption price equal to the principal amount thereof
to be redeemed (without premium), together with interest accrued thereon to the date fixed for
redemption:
Mandatory Sinking Fund
Payment Date
(August 1)
Mandatory Sinking Fund
Payment Amount
2030 $790,000
2031† 820,000
_____________________
† Final maturity
The principal amount of each mandatory sinking fund payment of any maturity will be reduced as
specified by the City, in $5,000 increments, by the amount of any Bonds of that maturity optionally
redeemed prior to the mandatory sinking fund payment date.
Selection of Bonds for Redemption. If less than all of the Bonds are called for redemption, the
Bonds will be redeemed in inverse order of maturities (or as otherwise directed by the City), and if less
than all of the Bonds of any given maturity are called for redemption, the portions of the Bonds of a given
maturity to be redeemed will be redeemed by lot.
3
Notice of Redemption. Notice of redemption of any Bonds will be given by the Paying Agent
upon the written request of the City by first class mail to the registered owners of any Bonds designated
for redemption at least 30 but not more than 60 days prior to the redemption date. Each notice of
redemption will contain the following information: (i) the date of such notice; (ii) the name of the Bonds
and the date of issue of the Bonds; (iii) the redemption date; (iv) the redemption price; (v) the dates of
maturity of the Bonds to be redeemed; (vi) (if less than all of the Bonds of any maturity are to be
redeemed) the distinctive numbers of the Bonds of each maturity to be redeemed; (vii) (in the case of
Bonds redeemed in part only) the respective portions of the principal amount of the Bonds of each
maturity to be redeemed; (viii) the CUSIP number, if any, of each maturity of Bonds to be redeemed; (ix)
a statement that such Bonds must be surrendered by the Owners at the Principal Corporate Trust Office of
the Paying Agent, or at such other place or places designated by the Paying Agent; (x) notice that further
interest on such Bonds will not accrue after the designated redemption date; and (xi) in the case of a
conditional notice, that such notice is conditioned upon certain circumstances and the manner of
rescinding such conditional notice.
Effect of Redemption. A certificate of the Paying Agent or the City that notice of call and
redemption has been given to Owners is conclusive as against all parties. The actual receipt by the
registered owner of any Bond or by any securities depository or any other party of notice of redemption is
not a condition precedent to redemption, and failure to receive such notice, or any defect in the notice
given, will not affect the validity of the proceedings for the redemption of such Bonds or the cessation of
interest on the date fixed for redemption. When notice of redemption has been given substantially as
provided for in the Paying Agent Agreement, and when the redemption price of the Bonds called for
redemption is set aside as provided in the Paying Agent Agreement, the Bonds designated for redemption
will become due and payable on the specified redemption date and interest will cease to accrue thereon as
of the redemption date, and upon presentation and surrender of such Bonds at the place specified in the
notice of redemption, such Bonds will be redeemed and paid at the redemption price thereof out of the
money provided therefor. The Owners of such Bonds so called for redemption after such redemption date
will look for the payment of such Bonds and the redemption premium thereon, if any, only to the interest
and sinking fund (the "Interest and Sinking Fund") or the escrow fund established for such purpose. All
Bonds redeemed must be cancelled forthwith by the Paying Agent and will not be reissued.
Conditional Notice of Redemption. Any notice of optional redemption of the Bonds delivered in
accordance with the Paying Agent Agreement may be conditional and if any condition stated in the notice
of redemption has not been satisfied on or prior to the redemption date, the notice will be of no force and
effect and the City will not be required to redeem such Bonds and the redemption will not be made. The
Paying Agent will within a reasonable time thereafter give notice, to the persons and in the manner in
which the notice of redemption was given, that such condition or conditions were not met and that the
redemption was cancelled.
Right to Rescind Notice of Redemption. The City may rescind any optional redemption and
notice thereof for any reason on any date on or prior to the date fixed for optional redemption by causing
written notice of the rescission to be given to the registered owners of the Bonds so called for redemption.
In addition, any optional redemption and notice thereof will be rescinded if for any reason on the date
fixed for redemption moneys are not available in the Interest and Sinking Fund established pursuant to the
Paying Agent Agreement or otherwise held in trust for such purpose in an amount sufficient to pay in full
on said date the principal of, interest, and any premium due on the Bonds called for redemption. Any
notice of rescission will be given in the same manner in which notice of redemption was originally given.
The actual receipt by the registered owner of any Bond of notice of such rescission is not a condition
precedent to rescission, and failure to receive such notice or any defect in such notice will not affect the
validity of the rescission.
4
Defeasance. If at any time the City pays or causes to be paid or there is otherwise paid to the
registered owners of all outstanding Bonds all of the principal, interest and premium, if any, represented
by Bonds at the times and in the manner provided in the Paying Agent Agreement and in the Bonds, or as
provided pursuant to the provisions of the Paying Agent Agreement described below, or as otherwise
provided by law consistent with the Paying Agent Agreement, then the Bond Resolution and other assets
made under the Bond Resolution and all agreements and covenants of the City under the Bond Resolution
will thereupon be satisfied and discharged and will terminate, except only that the City will remain liable
for payment of all principal, interest and premium, if any, represented by the Bonds, but only out of
monies on deposit in the Interest and Sinking Fund or otherwise held in trust for such payment.
Pursuant to the Paying Agent Agreement, the City may pay and discharge any or all of the Bonds
by depositing in trust with the Paying Agent (or an escrow agent) at or before maturity, Defeasance
Securities in an amount which, together with the interest to accrue thereon and available monies then on
deposit in the Interest and Sinking Fund of the City, will be fully sufficient to pay and discharge the
indebtedness on such Bonds (including all principal, interest and redemption premiums) at or before their
respective maturity dates. "Defeasance Securities" means non-callable, non-prepayable obligations of the
type listed in clause (i) or (ii) of the definition of Investment Securities herein. See "INVESTMENT OF
BOND PROCEEDS" herein.
Payments, Transfers and Exchanges Upon Abandonment of Book-Entry Only System. The
book-entry only system for registration of the ownership of the Bonds in book-entry form may be
discontinued at any time if: (1) DTC resigns as securities depository for the Bonds; or (2) the City
determines that a continuation of the system of book-entry transfers through DTC (or through a successor
securities depository) is not in the best interests of the City. In each of such events (unless the City
appoints a successor securities depository), the Bonds will be delivered in such denominations and
registered in the names of such persons as are requested in a certificate of the City, but without any
liability on the part of the City or the Paying Agent for the accuracy of such designation. Whenever DTC
requests the City and the Paying Agent to do so, the City and the Paying Agent will cooperate with DTC
in taking appropriate action after reasonable notice to arrange for another securities depository to maintain
custody of or to print bonds evidencing the Bonds. Thereafter, all Bonds are transferable or exchangeable
as described in the Paying Agent Agreement.
In the event that the book-entry only system is no longer used with respect to the Bonds, payment
of interest on the Bonds will be made on each interest payment date to the person whose name appears on
the bond registration books of the Paying Agent as the owner of the Bonds as of the close of business on
the fifteenth day of the month prior to such interest payment date, whether or not such day is a Business
Day (the "Record Date"). Payment of the interest on any Bond will be made by check or draft mailed by
first class mail to the registered owner of such Bond at such owner's address as it appears on the bond
registration books of the Paying Agent or at such address as such owner may have filed with the Paying
Agent for that purpose; or, upon the written request of the registered owner of Bonds aggregating not less
than $1,000,000 in principal amount, given no later than the Record Date preceding the applicable interest
payment date, by wire transfer in immediately available funds to an account maintained in the United
States at such wire address as such owner specifies in its written notice. Principal of, and premium, if
any, on the Bonds will be payable at the principal corporate trust office of the Paying Agent or at such
other location as the Paying Agent may designate. The Bonds will be in the form of fully-registered
Bonds and will be issued in denominations of $5,000 or any integral multiple thereof.
5
6
ESTIMATED SOURCES AND USES OF FUNDS
The following table sets forth the estimated sources and uses of proceeds with respect to the sale
of the Bonds.
Sources
Principal Amount of the Bonds...........................................$11,995,000.00
Net Original Issue Premium................................................ 459,738.00
Total Sources.............................................$12,454,738.00
Uses
Redemption of the 2001 Bonds $12,235,000.00
Underwriter's Discount.......................................................116,446.26
Costs of Issuance(1).............................................................. 103,291.74
Total Uses..................................................$12,454,738.00
____________________
(1) Costs of issuance include printing costs, rating agency fees, legal fees and other miscellaneous expenses. See
"SALE OF THE BONDS" herein.
[Remainder of Page Intentionally Left Blank]
DEBT SERVICE SCHEDULE
The following table sets forth the annual debt service schedule for the Bonds.
Year Ending August 1, Principal Interest
Annual Debt
Service
2012 $455,000 $436,728.32 $891,728.32
2013 485,000 407,935.00 892,935.00
2014 495,000 398,235.00 893,235.00
2015 500,000 388,335.00 888,335.00
2016 475,000 378,335.00 853,335.00
2017 485,000 364,085.00 849,085.00
2018 500,000 349,535.00 849,535.00
2019 525,000 329,535.00 854,535.00
2020 545,000 308,535.00 853,535.00
2021 565,000 286,735.00 851,735.00
2022 580,000 269,785.00 849,785.00
2023 610,000 246,585.00 856,585.00
2024 630,000 222,185.00 852,185.00
2025 655,000 196,985.00 851,985.00
2026 685,000 174,060.00 859,060.00
2027 705,000 150,085.00 855,085.00
2028 730,000 124,000.00 854,000.00
2029 760,000 94,800.00 854,800.00
2030 790,000 64,400.00 854,400.00
2031 820,000 32,800.00 852,800.00
Total(1) $11,995,000 $5,223,678.32 $17,218,678.32
(1) Totals may not add up correctly due to independent rounding.
7
SECURITY FOR THE BONDS
Paying Agent Agreement
The City and the Paying Agent will enter into the Paying Agent Agreement to provide for the
payment of the principal of and interest on the Bonds. Pursuant to the Paying Agent Agreement, the City
covenants that the money for the payment of principal and interest on the Bonds will be raised by ad
valorem taxation without limitation as to rate or amount (except with respect to certain personal property
which is taxable at limited rates) upon all taxable property located within the City, and provision will be
made for the levy and collection of such taxes in the manner provided by law, and the City will cause
such money to be transferred to the Paying Agent for deposit in the Interest and Sinking Fund.
Levy, Tax Rate and Assessed Valuation
According to the requirements of Article XIII A of the California Constitution (initially adopted
by California voters as Proposition 13 in 1978), the County of Santa Clara levies a one percent ad
valorem property tax on behalf of all taxing agencies in the County and the ad valorem property tax for
payment of the Bonds and the general obligation bonds of school districts and other governmental entities
in Santa Clara County. The one percent ad valorem property tax and the property tax for the Bonds are
assessed and collected by the County at the same time and on the same tax rolls. The proceeds of the
property tax collected for the Bonds would be applied by the City to pay debt service on the Bonds when
due. The proceeds of the one percent ad valorem property taxes are apportioned on the basis of a formula
established by State law. Under this formula, the City and all other taxing entities receive a base year
allocation plus an allocation on the basis of "situs" growth in assessed value prorated among the
jurisdictions which serve the tax rate areas within which the growth occurs. Tax rate areas are
specifically defined geographic areas which were developed to permit the levying of taxes for less than
countywide or less than citywide special districts. Certain other ad valorem property taxes and
assessments and other per-parcel taxes and assessments are also included in the levy pursuant to the
County's tax rolls.
The assessed valuation of property located within the County is established by the County
Assessor, except for public utility property, which is assessed by the State Board of Equalization.
Assessed valuations are reported at 100 percent of the full cash value of the property, as defined in
Article XIII A of the California Constitution. Full cash value is defined as "the county assessor's
valuation of real property as shown on the 1975-76 tax bill under "full cash value," or thereafter, the
appraised value of real property newly constructed, or when a change in ownership has occurred after the
1975 assessment." The full cash value may be adjusted annually to reflect inflation at a rate not to exceed
two percent per year, or a reduction in the consumer price index or comparable local data for the area or
may be reduced in the event of declining property value caused by damage, destruction or other factors
including a general economic downturn. The full cash value may also be adjusted due to change of
ownership or new construction. See "CONSTITUTIONAL AND STATUTORY TAX LIMITATIONS
ON TAXES AND APPROPRIATIONS" herein. The County Assessor may also temporarily reduce
assessed values of property within the County. Pursuant to Proposition 8, property owners are entitled to
the lower of the fair market value of their property as of January 1 or the assessed value as determined at
the time of purchase or construction, and increased by no more than two percent annually. See "–
Proposition 8 Reductions and Appeals to Assessed Value" below.
Article XIII A has had the general effect of stabilizing assessed valuation such that it does not
fluctuate to the same degree as the market value of property in a taxing area, but instead gradually reflects
changes in ownership of longer held properties that are reassessed upon ransfer and other permitted
increases and decreases of assessed value. As a result of Article XIII A and its restrictions on the County
8
9
Assessor's ability to increase assessed value, property that has been owned by the same taxpayer for many
years can have an assessed value that is much lower than the market value of the property. Property that
is similarly situated that has recently been acquired may have a substantially higher assessed value
reflecting the recent acquisition price. Increases in assessed value in a taxing area may occur due to the
change in ownership of property even when the rate of inflation or consumer price index do not permit a
full two percent annual increase in assessed valuation of other property located in the taxing area.
The table below shows a history of assessed valuations of property within the City. The total
assessed value for Fiscal Year 2010-11 is $9,963,412,097, a decline of 1.03% from Fiscal Year 2009-10.
TABLE 1
CITY OF SARATOGA
ASSESSED VALUATION HISTORY
FISCAL YEARS ENDED JUNE 30, 2006-2010
(In Thousands)
Type of Property 2006 2007 2008 2009 2010
Residential $7,883,965 $8,467,894 $9,025,628 $ 9,605,309 $ 9,729,087
Commercial 177,149 187,142 208,369 213,951 231,691
Industrial 8,921 9,099 9,281 9,467 9,656
Institutional 38,027 45,706 50,590 51,052 57,495
Vacant 90,611 107,228 110,656 128,898 110,225
Other 32,858 39,536 49,023 43,240 44,856
Unsecured 46,874 39,764 35,775 43,933 58,210
Total Assessed Property $8,278,405 $8,896,369 $9,489,322 $10,095,850 $10,241,220
Less: Tax Exempt
Real Property (133,951) (140,859)(159,369) (161,488) (173,628)
Total Taxable
Assessed Value $8,144,454 $8,755,510 $9,329,953 $9,934,362 $10,067,592
Source: City of Saratoga Comprehensive Annual Financial Report, Fiscal Year 2009-10.
Proposition 8 Reductions and Appeals to Assessed Value. The County reviews assessment
appeals upon individual request. In November 1978, State voters passed Proposition 8, which provides
that property owners are entitled to an assessment based on the lower of the fair market value of their
property as of the lien date (January 1), or the assessed value as determined at the time of purchase or
construction, and increased by no more than two percent annually. As a matter of policy and in
accordance with Proposition 8, the County Assessor has proactively responded to declining market values
by temporarily reducing assessed values.
According to the County Assessor, there are 286 active appeals in the City, requesting an
aggregate reduction of $206 million in assessed value.
See "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND
APPROPRIATIONS – Article XIII A."
Payment Dates and Liens
Taxes are levied for each fiscal year from July 1 to June 30 on taxable real and personal property
situated in the County as of the preceding January 1. However, upon a change in ownership of property
or completion of new construction, State law permits an accelerated recognition and taxation of increases
in real property assessed valuation (known as a "floating lien date"). For assessment and collection
purposes, all property (both real and personal) is classified either as "secured" or "unsecured" and is listed
accordingly on separate parts of the assessment roll. Property taxes arising on a floating lien date are
posted on a supplemental assessment roll (secured or unsecured, as the case may be). The "secured roll"
is that part of the assessment roll containing (i) property, the taxes on which are secured by a lien on the
real property which is sufficient, in the opinion of the County Assessor, to secure payment of the taxes
and (ii) State Board of Equalization assessed (public utilities) property. The "unsecured roll" is that part
of the assessment roll containing property, such as business property or leased or rented premises, which
is not secured by the underlying real property. California law provides partial exemptions from taxation
for owner-occupied residences (the "homeowner's exemption") in an amount of up to $7,000 per single
family residence. Under State law, revenues lost to local governments due to this exemption are
reimbursed by the State.
Property taxes on the secured roll are due in two installments, on November 1 and February 1 of
each fiscal year. If unpaid, such taxes become delinquent on December 10 and April 10, respectively, and
a ten percent penalty attaches to any delinquent payment. In addition, property on the secured roll with
respect to which taxes are delinquent is declared to be in default on or about October 30 of the fiscal year.
Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency
penalty, plus a redemption penalty of 1.5 percent per month to the time of redemption. If taxes are unpaid
for a period of five years or more, the tax-defaulted property is declared to be subject to the County Tax
Collector's power of sale and may be subsequently sold within two years by the County Tax Collector.
Property taxes on the unsecured roll are due as of the January 1 lien date and become delinquent,
if unpaid, on August 31. A 10 percent penalty attaches to delinquent taxes on property on the unsecured
roll, and an additional penalty of 1.5 percent per month begins to accrue beginning November 1. The
taxing authority has four ways of collecting unsecured personal property taxes: (1) a civil action against
the taxpayer; (2) filing a certificate in the office of the County Clerk specifying certain facts in order to
obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for
recordation in the County Recorder's office, in order to obtain a lien on certain property of the taxpayer;
and (4) seizure and sale of personal property, improvements or possessory interests, belonging to the
assessee.
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The City receives the full ad valorem property tax levy regardless of any delinquencies due to the
County’s Teeter Plan described below. See also Appendix A – “AUDITED FINANCIAL
STATEMENTS OF THE CITY OF SARATOGA FOR FISCAL YEAR 2009-10” attached hereto.
Teeter Plan
The Board of Supervisors of the County has approved the implementation if the Alternative
Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”), as
provided for in Section 4701 et seq. of the California Revenue and Taxation Code. Under the Teeter
Plan, the County apportions secured property taxes on an accrual basis when due (irrespective of actual
collections) to local political subdivisions, including the City, for which the County acts as the tax-
levying or tax-collecting agency. The Teeter Plan was effective beginning the fiscal year commencing
July 1, 1993.
The Teeter Plan is applicable to all tax levies on secured property for which the County acts as
the tax-levying or tax-collecting agency, or for which the County treasury is the legal depository of the
tax collections.
The ad valorem property tax to be levied to pay the interest on and principal of the Bonds will be
subject to the Teeter Plan. The City will receive 100% of the ad valorem property tax on secured property
levied to pay the Bonds irrespective of actual delinquencies in the collection of the tax by the County.
The Teeter Plan is to remain in effect unless the Board of Supervisors of the County orders its
discontinuance or unless, prior to the commencement of any fiscal year, the Board of Supervisors of the
County receives a petition for its discontinuance adopted by resolution of two-thirds of the participating
revenue districts in the County. Further, the County may, by resolution adopted not later than July 15 of
any subsequent fiscal year after a public hearing, discontinue the Teeter Plan as to any tax levying or
assessment levying agency if the rate of secured tax delinquency in that agency in any year exceeds three
percent of the total of all taxes and assessments levied on the secured rolls for that agency.
If the Teeter Plan is discontinued, only those secured property taxes actually collected would be
allocated to political subdivisions (including the City) for which the County acts as the tax-levying or tax
collecting agency.
Largest Taxpayers
The twenty largest taxpayers in the City for Fiscal Year 2010-11 and their taxable assessed values
are set forth in the following table.
TABLE 2
CITY OF SARATOGA
LARGEST SECURED PROPERTY TAXPAYERS
FISCAL YEAR 2010-11
Property Owner Primary Land Use
2010-11
Assessed
Valuation % of Total (1)
1. Cupertino Village Associates LLC Office Building $ 34,806,646 0.35%
2. Quito Village Associates LLC Shopping Center 19,000,000 0.19
3. John I. and Michelle Keller Residential 18,456,155 0.19
4. San Jose Water Works Water Company 14,675,569 0.15
5. Gregpenn Properties LLC Residential 14,389,914 0.15
6. David J. and Terri E. Morrison Office Building 13,753,273 0.14
7. John M. and Abby J. Sobrato Residential 13,288,933 0.13
8. Argonaut Associates, LLC Shopping Center 10,485,540 0.11
9. Ashok Krishnamurthi Residential 10,414,429 0.11
10. Public Storage Inc. Mini Storage 9,395,090 0.09
11. Coyote Properties IV LLC Residential 8,305,507 0.08
12. Ashok K. and Shipra Jain Residential 8,195,887 0.08
13. Venkatesh and Neelakantan Harinarayan Residential 7,897,238 0.08
14. David L. House Residential 7,455,760 0.08
15. JF Plaza Partners LP Shopping Center 7,379,806 0.07
16. Brian and Lorilee Dexheimer Residential 7,372,534 0.07
17. Ray A. Russo, Sr. Shopping Center 7,367,323 0.07
18. Michael A. and Patricia A. Klayko Residential 7,060,729 0.07
19. Eliyahou and Britt M. Harari Residential 6,950,981 0.07
20. Stephen J. Luczo Residential 6,942,929 0.07
$233,594,243 2.36%
(1) Based on 2010-11 Secured Assessed Valuation of $9,911,516,040.
Source: California Municipal Statistics, Inc.
The County Assessor reports that the following top taxpayers have unresolved appeals to their
assessed valuations: Cupertino Village Associates has one active appeal with $16.9 million at risk, David
House has two active appeals with $1,667,000 at risk, and Ashok Krishnamurthi has one active appeal
with $300,000 at risk.
Taxation of State-Assessed Utility Property
The State Constitution provides that most classes of property owned or used by regulated utilities
be assessed by the State Board of Equalization (the "BOE") and taxed locally. Property valued by the
BOE as an operating unit in a primary function of the utility taxpayer is known as "unitary property," a
concept designed to permit assessment of the utility as a going concern rather than assessment of each
individual element of real and personal property owned by the utility taxpayer. State-assessed unitary and
"operating nonunitary" property (which excludes nonunitary property of regulated railways) is allocated
to the counties based on the situs of the various components of the unitary property. Except for unitary
property of regulated railways and certain other excepted property, all unitary and operating nonunitary
property is taxed at special county-wide rates and distributed to taxing jurisdictions according to statutory
formulae generally based on the distribution of taxes in the prior year.
Assembly Bill 454 ("AB 454") (Chapter 921, Statutes of 1986) provides that revenues derived
from unitary property, commencing with Fiscal Year 1988-89, will be allocated as follows: (i) each
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jurisdiction will receive up to 102 percent of its prior year State-assessed revenue; and (ii) if county-wide
revenues generated from unitary property are less than the previous year's revenues or greater than 102
percent of the previous year's revenues, each jurisdiction will share the burden of the shortfall or excess
revenues by a specified formula. This provision applies to all unitary property except railroads, the
valuation of which continues to be allocated to individual tax rate areas.
The provisions of AB 454 do not constitute an elimination of the assessment of any State-
assessed properties nor a revision of the methods of assessing utilities by the State Board of Equalization.
Generally, AB 454 allows valuation growth or decline of unitary property to be shared by all jurisdictions
in a county.
In the past, the State has passed legislation that resulted in a decrease in the amount of assessed
utility property and corresponding tax revenues allocated to the State's local taxing agencies, including the
City. The City is unable to predict whether legislation will be proposed or enacted in the future in
response to industry restructuring, or whether any future legislation or litigation may affect the State's
methods of assessing utility property and the allocation of assessed value to local taxing agencies.
Direct and Overlapping Debt Report
Contained within the City's tax code area are districts providing public services, a number of
which have issued general obligation bonds and lease obligations. Direct debt constitutes debt directly
issued by the City while overlapping debt constitutes that portion of debt issued by different public
entities within the same tax code area as the City's. The City is not responsible for the overlapping debt
of other local agencies.
The statement of direct and overlapping debt (the "Debt Report") set forth below was prepared by
California Municipal Statistics, Inc., and is dated as of June 30, 2011. The Debt Report includes only
such information as has been reported to California Municipal Statistics, Inc. by the issuers of the debt
described therein and by others. The Debt Report is included for general information purposes only. The
City has not independently verified its completeness or accuracy and makes no representations in
connection therewith.
[Remainder of Page Intentionally Left Blank]
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TABLE 3
CITY OF SARATOGA
ESTIMATED DIRECT AND OVERLAPPING BONDED DEBT
AS OF JUNE 30, 2011
2010-11 Assessed Valuation: $9,963,412,097
Total Debt City’s Share of
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: 6/30/11 % Applicable (1) Debt 6/30/11
Santa Clara County $334,900,000 3.755% $12,575,495
Santa Clara Valley Water District, Zone W-1 405,000 4.034 16,338
Foothill-De Anza Community College District 466,224,288 1.718 8,009,733
West Valley Community College District 213,049,346 11.820 25,182,433
Campbell Union High School District 167,315,000 5.606 9,379,679
Fremont Union High School District 265,975,108 3.709 9,865,017
Los Gatos-Saratoga Joint Union High School District 55,215,000 40.690 22,466,984
Campbell Union School District 119,646,120 6.953 8,318,995
Cupertino Union School District 122,479,905 6.109 7,482,297
Moreland School District 71,683,662 12.793 9,170,491
Saratoga Union School District 47,550,032 85.966 40,876,861
Saratoga Fire Protection District 4,818,737 97.261 4,686,752
City of Saratoga 12,605,000 100. 12,605,000
Santa Clara Valley Water District Benefit Assessment District 143,160,000 3.755 5,375,658
TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $176,011,733
OVERLAPPING GENERAL FUND DEBT:
Santa Clara County General Fund Obligations $786,980,000 3.755% $29,551,099
Santa Clara County Pension Obligations 386,024,822 3.755 14,495,232
Santa Clara County Board of Education Certificates of Participation 12,580,000 3.755 472,379
Santa Clara County Vector Control District Certificates of Participation 3,800,000 3.755 142,690
Foothill-DeAnza Community College District Certificates of Participation 21,215,000 1.718 364,474
West Valley-Mission Community College District General Fund Obligations 56,120,000 11.820 6,633,384
Los Gatos-Saratoga Joint Union High School District Certificates of Participation 9,650,000 40.690 3,926,585
Saratoga Union School District Certificates of Participation 6,110,000 85.966 5,252,523
Midpeninsula Regional Open Space Park District General Fund Obligations 131,003,031 6.236 8,169,349
TOTAL OVERLAPPING GENERAL FUND DEBT $69,007,715
TOTAL DIRECT DEBT $12,605,000
TOTAL OVERLAPPING DEBT $232,414,448
COMBINED TOTAL DIRECT AND OVERLAPPING DEBT $245,019,448 (2)
(1) Percentage of overlapping agency's assessed valuation located within boundaries of the city.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital
lease obligations.
Ratios to 2010-11 Assessed Valuation: Direct Debt ($12,605,000)......................................................................0.13%
Total Direct and Overlapping Tax and Assessment Debt........................1.77%
Combined Total Direct and Overlapping Debt........................................2.46%
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/10: $0
Source: California Municipal Statistics, Inc.
Factors Affecting Property Tax Security for the Bonds
The annual property tax rate for repayment of the Bonds will be based on the total assessed value
of taxable property located within the City and the scheduled debt service on the Bonds in each year.
Because of Article XIII A's limitations on the annual increase in assessed values of taxable properties
(generally a two percent per year limit on increases in the assessed value of a property absent changes in
ownership or new improvements), the assessed value of many properties within the City remains below
current market values. In general, Article XIII A may cause assessed values to lag behind both increases
and decreases in market values. See "SECURITY FOR THE BONDS – Levy, Tax Rate and Assessed
Valuation" and "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND
APPROPRIATIONS" herein. Fluctuations in the annual debt service on the Bonds and the assessed value
of taxable property within the City may cause the annual property tax rate applicable to the Bonds to
fluctuate. Issuance by the City, the County or other taxing entities of additional authorized bonds payable
from ad valorem property taxes may cause the overall property tax rate in the City to increase.
Certain factors that may affect the security for the Bonds are discussed in more detail below.
Total Assessed Value of Taxable Property in the City. The greater the assessed value of taxable
property located within the City, the lower the tax rate necessary to generate taxes sufficient to pay
scheduled debt service on general obligation bonds. Total assessed valuation of taxable property within
the City in Fiscal Year 2010-11 was approximately $9,963,412,097. See "SECURITY FOR THE
BONDS – Levy, Tax Rate and Assessed Valuation" and accompanying discussion of assessed valuation
for Fiscal Year 2010-11.
Natural and economic forces can affect the assessed value of taxable property within the City.
The City is located in a seismically active region, and damage from an earthquake in or near the City
could cause moderate to extensive damage to taxable property. See "SECURITY FOR THE BONDS –
Factors Affecting Property Tax Security for the Bonds – Seismic Risks" below. Other natural or
manmade disasters, such as flood, fire, toxic dumping or acts of terrorism, could cause a reduction in the
assessed value of taxable property within the City. Economic and market forces, such as a downturn in
the regional economy generally, can also affect assessed values, particularly as these forces might
reverberate in the residential housing and commercial property markets. In addition, the total assessed
value can be reduced through the reclassification of taxable property to a class exempt from taxation,
whether by ownership or use (such as exemptions for property owned by State and local agencies and
property used for qualified educational, hospital, charitable or religious purposes).
Reductions in the market values of taxable property may cause property owners to appeal
assessed values and may be associated with an increase in delinquency rates for taxes. See "SECURITY
FOR THE BONDS – Levy, Tax Rate and Assessed Valuation – Proposition 8 Reductions and Appeals to
Assessed Value" herein.
Concentration of Taxable Property Ownership. The more property (by assessed value) owned
by any single taxpayer, the more exposure of tax collections to weakness in that taxpayer's financial
situation and ability or willingness to pay property taxes. In Fiscal Year 2010-11, no single taxpayer
owned more than 0.35% percent of the total taxable property within the City. See "SECURITY FOR
THE BONDS – Largest Taxpayers" herein.
Property Tax Rates. One factor in the ability of taxpayers to pay taxes for general obligation
bonds is the overall rate of tax. Parcels in the City are subject to a number of tax rate areas, which are
specifically defined geographic areas developed to permit the levying of taxes for less than countywide or
less than citywide special districts. Each tax area has a unique combination of taxing agencies and special
15
assessments. A typical tax rate area has tax rates per $100 of assessed value that include a base rate of
one percent (or $1.00 per $100 of assessed value), plus a levy for school bonds, a levy for water bonds, a
levy for the County's pension funding and miscellaneous other levies and assessments for other debt. See
"SECURITY FOR THE BONDS – Levy, Tax Rate and Assessed Valuation."
Debt Burden on Owners of Taxable Property within the City. Another measure of the debt
burden on local taxpayers is total debt as a percentage of taxable property value. See "SECURITY FOR
THE BONDS – Levy, Tax Rate and Assessed Valuation" and "SECURITY FOR THE BONDS – Direct
and Overlapping Debt Report."
Seismic Risks. The State, including Santa Clara County, is a seismically active region. Active
earthquake faults underlie both Santa Clara County and the surrounding Bay Area, including the San
Andreas Fault and the Hayward Fault. In addition to the potential damage to City-owned buildings and
facilities (on which the City does not generally carry earthquake insurance), a major earthquake may
cause significant temporary and possibly long-term harm to the City's economy, tax receipts and
residential and business real property values.
City of Saratoga Recent Developments
For certain economic, demographic and financial information with respect to the City, see
Appendix A – “AUDITED FINANCIAL STATEMENTS OF THE CITY OF SARATOGA FOR
FISCAL YEAR 2009-10” attached hereto and “SECURITY FOR THE BONDS – City of Saratoga
Recent Developments” herein.
In addition, below is a description of recent developments in the City since June 30, 2010.
The City’s General Fund may be negatively impacted under the Fiscal Year 2011-12 State
budget. The State Fiscal Year 2011-12 budget proposal does not extend the Supplemental Law
Enforcement Services Funds and Citizens’ Option for Public Safety Grant, which will result in a
$100,000 reduction in funds per year for the City. The Budget also results in a reinstatement of Booking
Fees, estimated at $35,000 per year for the City.
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON
TAXES AND APPROPRIATIONS
California law permits citizens to effect changes to the State's Constitution and statutes, without
involvement by the legislature, through the initiative process. Under this process, initiative supporters
submit petitions to State election officials, who are required to submit the initiative to voters if the
petitions meet statutory requirements. Many provisions of State law have been added or affected by
initiatives. The initiatives described as follows have materially adversely affected the City's ability to
raise revenues or spend money.
Article XIII A. Article XIII A of the California Constitution limits the amount of ad valorem tax
on real property to one percent of the full cash value of the real property plus amounts necessary to pay
debt service on specified indebtedness approved by voters. Full cash value means "the county assessor's
valuation of real property as shown on the 1975-76 tax bill under "full cash value," or thereafter, the
appraised value of real property newly constructed, or when a change in ownership has occurred after the
1975 assessment." The full cash value may be adjusted annually to reflect inflation at a rate not to exceed
two percent per year, or a reduction in the consumer price index or comparable local data for the area or
may be reduced in the event of declining property value caused by damage, destruction or other factors
16
including a general economic downturn. The full cash value may be adjusted due to change of ownership
or new construction. See "SECURITY FOR THE BONDS – Levy, Tax Rate and Assessed Valuation"
herein.
Article XIII B. Article XIII B of the California Constitution limits the annual appropriations of
governmental agencies. The appropriations limit for the City in each year is based on the limit for the
prior year, adjusted for changes in the costs of living and changes in population, and adjusted, where
applicable, for transfer of financial responsibility of providing services to or from another unit of
government, with other provisions applicable in case of emergency. The change in the cost of living is, at
the City's option, either (i) the percentage change in State per capita personal income, or (ii) the
percentage change in the local assessment roll for the jurisdiction due to the addition of nonresidential
new construction. The measurement of change in population is a blended average of statewide overall
population growth, and change in attendance at local school and community college districts. Article XIII
B permits the City to change the appropriations limit by vote of the electorate in conformity with statutory
and Constitutional voting requirements, but any such voter-approved change can only be effective for a
maximum of four years.
Appropriations subject to Article XIII B include generally any authorization to expend during the
fiscal year the proceeds of taxes levied by the City, exclusive of State subventions, refunds of taxes,
benefit payments from retirement, unemployment insurance and disability insurance funds.
Appropriations subject to limitation pursuant to Article XIII B do not include debt service on specified
indebtedness, appropriations required to comply with mandates of courts or the Federal government and
appropriations for qualified outlay projects. Debt service on the Bonds, as voter-approved obligations, are
not subject to Article XIII B appropriation limitations. "Proceeds of taxes" include, but are not limited to,
all tax revenues and the proceeds to the County from (i) regulatory licenses, user charges, and user fees to
the extent such proceeds exceed the cost of providing the service or regulation, (ii) the investment of tax
revenues and (iii) State subventions received by the City. The appropriations limit is tested over
consecutive two-year periods. Any excess of the aggregate "proceeds of taxes" received by the City over
such two-year period above the combined appropriations limits for those two years is to be returned to
taxpayers by reductions in tax rates or fee schedules over the subsequent two years.
The City's appropriations limit for Fiscal Year 2009-10 was $31,261,971, and the amount subject
to the limitation was approximately $9,941,500. The City's appropriations limit for Fiscal Year 2010-11
was $30,851,813 and the amount of appropriations subject to limitation for that year was approximately
$9,599,500.
Proposition 62. Provisions of State law added by the voter approval of Proposition 62 in 1986
(a) require that any new or higher taxes for general governmental purposes imposed by the local agency
be approved by a two-thirds vote of the Board and by a majority vote of the voters of the local agency
voting in an election on the tax, (b) require that any special tax (defined as taxes levied for other than
general governmental purposes) imposed by the local agency be approved by a two-thirds vote of the
voters of the local agency voting in an election on the tax, (c) restrict the use of revenues from a special
tax to the purposes or for the service for which the special tax was imposed, (d) prohibit the imposition of
ad valorem taxes on real property by the local agency except as permitted by Article XIII A of the
California Constitution and (e) prohibit the imposition of transaction taxes and sales taxes on the sale of
real property by the City.
Article XIII C. Articles XIII C and XIII D of the California Constitution were added in 1996.
Article XIII C requires that all new local taxes be submitted to the electorate before they become
effective. Taxes for general governmental purposes of the City require a majority vote and taxes for
specific purposes require a two-thirds vote. In addition Article XIII C removed many of the limitations
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on the initiative power in matters of reducing or repealing any local tax, assessment, fee or charge. As a
result, voters of the City could approve initiatives which reduce or repeal local taxes, assessments, fees or
charges currently comprising a substantial part of the City's general fund. No such initiative is currently
pending, or to the knowledge of the City, proposed.
Article XIII D. Article XIII D imposes requirements and limitations for "assessments" for
governmental services and programs. "Assessment" is defined to mean any levy or charge upon real
property for a special benefit conferred upon the real property. Article XIII D limits "fees" and "charges,"
defined to mean "any levy other than an ad valorem tax, a special tax, or an assessment, imposed by a
local government upon a parcel or upon a person as an incident of property ownership, including a user
fee or charge for a property related service." Property related fees and charges (i) must not generate
revenues exceeding the funds required to provide the property related service, (ii) must not be used for
any purpose other than those for which the fees and charges are imposed, (iii) must be for a service
actually used by, or immediately available to, the owner of the property in question, or (iv) must not be
used for general governmental services, including police, fire or library services, where the service is
available to the public at large in substantially the same manner as it is to property owners. Further, before
any property related fee or charge may be imposed or increased, written notice must be given to the
record owner of each parcel of land affected by such fee or charge. The City must then hold a hearing
upon the proposed imposition or increase, and if written protests against the proposal are presented by a
majority of the owners of the identified parcels, the City may not impose or increase the fee or charge.
Moreover, except for fees or charges for sewer, water and refuse collection services, or fees for electrical
and gas service, which are not treated as "property related" for purposes of Article XIII D, no property
related fee or charge may be imposed or increased without majority approval by the property owners
subject to the fee or charge or, at the option of the local agency, two-thirds voter approval by the
electorate residing in the affected area.
Proposition 1A. Proposition 1A, proposed by the Legislature in connection with the 2004-05
Budget Act, approved by the voters in November 2004 and generally effective in Fiscal Year 2006-07,
provides that the State may not reduce any local sales tax rate, limit existing local government authority to
levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions.
Proposition 1A generally prohibits the State from shifting to schools or community colleges any share of
property tax revenues allocated to local governments for any fiscal year, as set forth under the laws in
effect as of November 3, 2004. Any change in the allocation of property tax revenues among local
governments within a county must be approved by two-thirds of both houses of the Legislature.
Proposition 1A provides, however, that beginning in Fiscal Year 2008-09, the State may shift to schools
and community colleges up to eight percent of local government property tax revenues, which amount
must be repaid, with interest, within three years, if the Governor proclaims that the shift is needed due to a
severe state financial hardship, the shift is approved by two-thirds of both houses and certain other
conditions are met. The State may also approve voluntary exchanges of local sales tax and property tax
revenues among local governments within a county. Proposition 1A also provides that if the State
reduces the vehicle license fee rate currently in effect, 0.65 percent of vehicle value, the State must
provide local governments with equal replacement revenues.
Proposition 1A may result in increased and more stable City revenues. The magnitude of such
increase and stability is unknown and would depend on future actions by the State. However, Proposition
1A could also result in decreased resources being available for State programs. This reduction, in turn,
could affect actions taken by the State to resolve budget difficulties. Such actions could include
increasing State taxes, decreasing spending on other State programs or other action, some of which could
be adverse to the finances of the City.
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Future Initiatives. Article XIII A, Article XIII B, Article XIII C and Article XIII D of the State
Constitution and the statutes added by Proposition 62 and Proposition 1A were all adopted pursuant to the
State's initiative process. The limitations imposed upon the City by these provisions hinder the City’s
ability to raise revenues through taxes or otherwise and may therefore prevent the City from meeting
increased expenditure requirements. The City expects that other initiative measures will be adopted,
some of which may place further limitations on the ability of the State, the City or local districts to
increase revenues or to spend money or which could have other financially adverse effects such as
requiring the City to undertake new responsibilities. Such other initiatives could have a material adverse
effect on the City's financial condition.
TAX MATTERS
Opinion of Bond Counsel
In the opinion of Hawkins Delafield & Wood LLP, Bond Counsel to the City, under existing
statutes and court decisions and assuming continuing compliance with certain tax covenants described
herein, (i) interest on the Bonds is excluded from gross income for Federal income tax purposes pursuant
to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) interest on the
Bonds is not treated as a preference item in calculating the alternative minimum tax imposed on
individuals and corporations under the Code; such interest, however, is included in the adjusted current
earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such
corporations. In rendering its opinion, Bond Counsel has relied on certain representations, certifications
of fact, and statements of reasonable expectations made by the City in connection with the Bonds, and
Bond Counsel has assumed compliance by the City with certain ongoing covenants to comply with
applicable requirements of the Code to assure the exclusion of interest on the Bonds from gross income
under Section 103 of the Code.
In addition, in the opinion of Bond Counsel to the City, under existing statutes, interest on the
Bonds is exempt from State of California personal income taxes.
Bond Counsel expresses no opinion regarding any other Federal or state tax consequences with
respect to the Bonds. Bond Counsel renders its opinion under existing statutes and court decisions as of
the issue date, and assumes no obligation to update, revise or supplement its opinion to reflect any action
hereafter taken or not taken, or any facts or circumstances that may hereafter come to its attention, or
changes in law or in interpretations thereof that may hereafter occur, or for any other reason. Bond
Counsel expresses no opinion on the effect of any action hereafter taken or not taken in reliance upon an
opinion of other counsel on the exclusion from gross income for Federal income tax purposes of interest
on the Bonds, or under state and local tax law.
Certain Ongoing Federal Tax Requirements and Covenants
The Code establishes certain ongoing requirements that must be met subsequent to the issuance
and delivery of the Bonds in order that interest on the Bonds be and remain excluded from gross income
under Section 103 of the Code. These requirements include, but are not limited to, requirements relating
to use and expenditure of gross proceeds of the Bonds, yield and other restrictions on investments of
gross proceeds, and the arbitrage rebate requirement that certain excess earnings on gross proceeds be
rebated to the Federal government. Noncompliance with such requirements may cause interest on the
Bonds to become included in gross income for Federal income tax purposes retroactive to their issue date,
irrespective of the date on which such noncompliance occurs or is discovered. The City has covenanted
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to comply with certain applicable requirements of the Code to assure the exclusion of interest on the
Bonds from gross income under Section 103 of the Code.
Certain Collateral Federal Tax Consequences
The following is a brief discussion of certain collateral Federal income tax matters with respect to
the Bonds. It does not purport to address all aspects of Federal taxation that may be relevant to a
particular owner of a Bond. Prospective investors, particularly those who may be subject to special rules,
are advised to consult their own tax advisors regarding the Federal tax consequences of owning and
disposing of the Bonds.
Prospective owners of the Bonds should be aware that the ownership of such obligations may
result in collateral Federal income tax consequences to various categories of persons, such as corporations
(including S corporations and foreign corporations), financial institutions, property and casualty and life
insurance companies, individual recipients of Social Security and railroad retirement benefits, individuals
otherwise eligible for the earned income tax credit, and taxpayers deemed to have incurred or continued
indebtedness to purchase or carry obligations the interest on which is excluded from gross income for
Federal income tax purposes. Interest on the Bonds may be taken into account in determining the tax
liability of foreign corporations subject to the branch profits tax imposed by Section 884 of the Code.
Original Issue Discount
“Original issue discount” (“OID”) is the excess of the sum of all amounts payable at the stated
maturity of a Bond (excluding certain “qualified stated interest” that is unconditionally payable at least
annually at prescribed rates) over the issue price of that maturity. In general, the “issue price” of a
maturity means the first price at which a substantial amount of the Bonds of that maturity was sold
(excluding sales to bond houses, brokers, or similar persons acting in the capacity as underwriters,
placement agents, or wholesalers). In general, the issue price for each maturity of Bonds is expected to be
the initial public offering price set forth on the cover page of the Official Statement. Bond Counsel
further is of the opinion that, for any Bonds having OID (a “Discount Bond”), OID that has accrued and is
properly allocable to the owners of the Discount Bonds under Section 1288 of the Code is excludable
from gross income for Federal income tax purposes to the same extent as other interest on the Bonds.
In general, under Section 1288 of the Code, OID on a Discount Bond accrues under a constant
yield method, based on periodic compounding of interest over prescribed accrual periods using a
compounding rate determined by reference to the yield on that Discount Bond. An owner’s adjusted basis
in a Discount Bond is increased by accrued OID for purposes of determining gain or loss on sale,
exchange, or other disposition of such Bond. Accrued OID may be taken into account as an increase in
the amount of tax-exempt income received or deemed to have been received for purposes of determining
various other tax consequences of owning a Discount Bond even though there will not be a corresponding
cash payment.
Owners of Discount Bonds should consult their own tax advisors with respect to the treatment of
original issue discount for Federal income tax purposes, including various special rules relating thereto,
and the state and local tax consequences of acquiring, holding, and disposing of Discount Bonds.
Bond Premium
In general, if an owner acquires a Bond for a purchase price (excluding accrued interest) or
otherwise at a tax basis that reflects a premium over the sum of all amounts payable on the Bond after the
acquisition date (excluding certain “qualified stated interest” that is unconditionally payable at least
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annually at prescribed rates), that premium constitutes “bond premium” on that Bond (a “Premium
Bond”). In general, under Section 171 of the Code, an owner of a Premium Bond must amortize the bond
premium over the remaining term of the Premium Bond, based on the owner’s yield over the remaining
term of the Premium Bond determined based on constant yield principles (in certain cases involving a
Premium Bond callable prior to its stated maturity date, the amortization period and yield may be required
to be determined on the basis of an earlier call date that results in the lowest yield on such bond). An
owner of a Premium Bond must amortize the bond premium by offsetting the qualified stated interest
allocable to each interest accrual period under the owner’s regular method of accounting against the bond
premium allocable to that period. In the case of a tax-exempt Premium Bond, if the bond premium
allocable to an accrual period exceeds the qualified stated interest allocable to that accrual period, the
excess is a nondeductible loss. Under certain circumstances, the owner of a Premium Bond may realize a
taxable gain upon disposition of the Premium Bond even though it is sold or redeemed for an amount less
than or equal to the owner’s original acquisition cost. Owners of any Premium Bonds should consult
their own tax advisors regarding the treatment of bond premium for Federal income tax purposes,
including various special rules relating thereto, and state and local tax consequences, in connection with
the acquisition, ownership, amortization of bond premium on, sale, exchange, or other disposition of
Premium Bonds.
Information Reporting and Backup Withholding
Information reporting requirements apply to interest paid on tax-exempt obligations, including the
Bonds. In general, such requirements are satisfied if the interest recipient completes, and provides the
payor with, a Form W-9, “Request for Taxpayer Identification Number and Certification,” or if the
recipient is one of a limited class of exempt recipients. A recipient not otherwise exempt from
information reporting who fails to satisfy the information reporting requirements will be subject to
“backup withholding,” which means that the payor is required to deduct and withhold a tax from the
interest payment, calculated in the manner set forth in the Code. For the foregoing purpose, a “payor”
generally refers to the person or entity from whom a recipient receives its payments of interest or who
collects such payments on behalf of the recipient.
If an owner purchasing a Bond through a brokerage account has executed a Form W-9 in
connection with the establishment of such account, as generally can be expected, no backup withholding
should occur. In any event, backup withholding does not affect the excludability of the interest on the
Bonds from gross income for Federal income tax purposes. Any amounts withheld pursuant to backup
withholding would be allowed as a refund or a credit against the owner’s Federal income tax once the
required information is furnished to the Internal Revenue Service.
Miscellaneous
Tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the
Federal or state level, may adversely affect the tax-exempt status of interest on the Bonds under Federal
or state law and could affect the market price or marketability of the Bonds.
Prospective purchasers of the Bonds should consult their own tax advisors regarding the
foregoing matters.
FINANCIAL STATEMENTS
The audited financial statements of the City for fiscal year 2009-2010 are attached hereto as
Appendix A and should be read in their entirety. The City’s independent auditor was not requested to
consent to the inclusion of its report in Appendix A, nor has such auditor undertaken to update its report
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or take any action intended or likely to elicit information concerning the accuracy, completeness or
fairness of the statements made in this official statement, and no opinion is expressed by such auditor
with respect to any event subsequent to the date of its report.
CERTAIN LEGAL MATTERS
Hawkins Delafield & Wood LLP, San Francisco, California, Bond Counsel to the City, will
render an opinion with respect to the validity of the Bonds. A complete copy of the proposed form of the
opinion to be delivered by Bond Counsel is contained in Appendix B hereto. Certain legal matters will be
passed upon for the City by Richard Taylor, Esq., Shute, Mihaly & Weinberger LLP, City Attorney.
Hawkins Delafield & Wood LLP has also served as Disclosure Counsel to the City. Bond
Counsel/Disclosure Counsel will receive compensation from the City contingent upon the sale and
delivery of the Bonds.
ABSENCE OF LITIGATION
No litigation is pending or threatened concerning the validity of the Bonds, and a certification to
that effect will be furnished to purchasers at the time of the original delivery of the Bonds. The City is
not aware of any litigation pending or threatened questioning the political existence of the City or
Contesting the City’s ability to receive assessments or to collect other revenues or contesting the City’s
ability to issue and retire the Bonds.
CONTINUING DISCLOSURE
The City will execute a Continuing Disclosure Certificate, to be dated as of the Closing Date (the
"Continuing Disclosure Certificate"), which provides for certain disclosure obligations on the part of the
City. Under the Continuing Disclosure Certificate, the City will covenant for the benefit of Owners and
beneficial owners of the Bonds to provide certain financial information and operating data relating to the
City by not later than March 30 of each year, commencing with the reports for Fiscal Year 2010-11 which
is to be filed by March 30, 2012 (the "Annual Reports"), and to provide notices of the occurrence of
certain enumerated events (the "Listed Events"), if material. All Annual Reports and notices of Listed
Events must be filed with the MSRB's Electronic Municipal Market Access System. These covenants
have been made in order to assist the initial purchasers of the Bonds in complying with Securities and
Exchange Commission Rule 15c2-12(b)(5) (the "Rule") For a form of the Continuing Disclosure
Certificate, see APPENDIX D – "FORM OF CONTINUING DISCLOSURE CERTIFICATE" attached
hereto. The City has never failed to comply in all material respects with any previous undertakings with
regard to said Rule to provide annual reports or notices of Listed Events.
FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference in this Official Statement constitute
"forward-looking statements." Such statements are generally identifiable by the terminology used such as
"plan," "expect," "estimate," "budget," "intend," "projection" or other similar words.
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED
IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM
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ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY
SUCH FORWARD-LOOKING STATEMENTS. THE CITY DOES NOT PLAN TO ISSUE ANY
UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN
THEIR EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH
STATEMENTS ARE BASED OCCUR OR DO NOT OCCUR.
RATINGS
Moody's Investors Service ("Moody's") and Standard & Poor's Ratings Service ("S&P") have
assigned the Bonds the ratings of "Aaa" and "AAA," respectively. Certain information was supplied by
the City to the rating agencies to be considered in evaluating the Bonds. Such ratings express only the
views of the rating agencies and are not a recommendation to buy, sell or hold the Bonds.
There is no assurance that such ratings will continue for any given period of time or that they will
not be reduced or withdrawn entirely by the rating agencies, or either of them, if in their, or its, judgment,
circumstances so warrant. The City undertakes no responsibility to oppose any such revision or
withdrawal, although the City will covenant in the Continuing Disclosure Certificate to provide notice of
any rating changes to the MSRB's Electronic Municipal Market Access System. Any such downward
revision or withdrawal may have an adverse effect on the market price of the Bonds.
SALE OF THE BONDS
The Bonds were sold at competitive bid on June 29, 2011. The Bonds were awarded to Citigroup
Global Markets Inc. (the "Purchaser"), at a purchase price of $12,338,291.74 (consisting of
$11,995,000.00 aggregate principal amount, plus $459,738.00 of net original issue premium, less
underwriter's discount of $116,446.26). The Official Notice of Sale provided that all Bonds would be
purchased if any were purchased, the obligation to make such purchase being subject to certain terms and
conditions set forth in the Official Notice of Sale, the approval of certain legal matters by Bond Counsel,
and certain other conditions. The Purchaser of the Bonds has represented to the City that the Bonds have
been re-offered to the public at the yields stated on the inside cover page hereof. See "ESTIMATED
SOURCES AND USES OF FUNDS."
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ADDITIONAL INFORMATION
The purpose of this Official Statement is to supply information to prospective buyers of the
Bonds. Quotations and summaries and explanations of the Bonds and of statutes and documents
contained in this Official Statement do not purport to be complete, and reference is made to such
documents and statutes for full and complete statements of their provisions.
The execution and delivery of this Official Statement have been duly authorized by the City.
CITY OF SARATOGA
By: /s/ Dave Anderson
City Manager
APPENDIX A
CITY OF SARATOGA AUDITED FINANCIAL STATEMENTS FOR
FISCAL YEAR ENDED JUNE 30, 2010
(THIS PAGE INTENTIONALLY LEFT BLANK)
C I T Y O F S A R A T O G A
C A L I F O R N I A
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FISCAL YEAR 2009/10
Saratoga, California
Comprehensive Annual Financial Report
For the Fiscal Year Ended June 30, 2010
City Council
Kathleen King ............................................................................................................. Mayor
Jill Hunter........................................................................................................... Vice Mayor
Chuck Page ................................................................................................ Council Member
Howard Miller ............................................................................................ Council Member
Manny Cappello ......................................................................................... Council Member
Presented under the direction of:
David Anderson, City Manager
Finance & Administrative Services Department
CITY OF SARATOGA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED JUNE 30,2010
i
TABLE OF CONTENTS
INTRODUCTORY SECTION
Letter of Transmittal ......................................................................................................... 1
GFOA Certificate of Achievement for Excellence in Financial Reporting ........................... 5
Principal Officers of the City ............................................................................................ 6
Organization Chart ........................................................................................................... 7
FINANCIAL SECTION
Independent Auditor’s Report ............................................................................................. 9
Management’s Discussion and Analysis (Required Supplementary Information) ............. 11
Basic Financial Statements:
Government-Wide Financial Statements
Statement of Net Assets ............................................................................................ 23
Statement of Activities and Changes in Net Assets ..................................................... 24
Fund Financial Statements
Governmental Funds:
Balance Sheet ........................................................................................................... 25
Reconciliation of the Government Funds Balance Sheet
to the Government-Wide Financial Statement of Net Assets .................................. 26
Statement of Revenues, Expenditures and Changes in Fund Balances ......................... 27
Reconciliation of the Governmental Funds Statement of Revenues,
Expenditures and Changes in Fund Balances to the Government-Wide
Statement of Activities and Changes in Net Assets ................................................ 28
Proprietary Funds:
Statement of Net Assets ............................................................................................ 29
Statement of Revenues, Expenses, and Changes in Fund Net Assets ........................... 30
Statement of Cash Flows ........................................................................................... 31
Fiduciary Funds:
Statement of Fiduciary Net Assets ............................................................................. 32
Basic Financial Statement Notes:
Notes to the Basic Financial Statements ..................................................................... 33
Required Supplementary Information
Budgetary Information .............................................................................................. 57
Modified Approach for City Streets Infrastructure Capital Assets ............................... 59
CITY OF SARATOGA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED JUNE 30,2010
ii
TABLE OF CONTENTS CONTINUED
SUPPLEMENTARY INFORMATION:
Non-Major Governmental Funds
Combining Balance Sheets ....................................................................................... 62
Combining Statement of Revenues, Expenditures and Changes in Fund Balances ........ 64
Schedule of Revenues, Exp and Changes in Fund Balances – Budget and Actual:
Capital Improvements .......................................................................................... 66
Lighting & Landscape Assessment Districts Special Revenue Funds ..................... 67
Community Development Block Grant Special Revenue Fund ............................... 68
Library Bond Debt Service Fund .......................................................................... 69
Library Expansion Capital Project Fund ............................................................... 70
Fiduciary Funds
Statement of Changes in Assets and Liabilities – Agency Funds ................................. 72
Internal Service Funds
Combining Statement of Net Assets ........................................................................... 74
Combining Statement of Revenues, Expenses, and Change in Fund Balance ............... 76
Combining Statement of Cash Flows ......................................................................... 78
Capital Assets Used in the Operation of Governmental Funds
Comparative Schedule by Source ............................................................................... 83
Schedule by Function and Activity ............................................................................ 84
Schedule of Changes by Function and Activity .......................................................... 86
Statistical Section (Unaudited)
Net Assets by Component .......................................................................................... 88
Changes in Net Assets ............................................................................................... 89
Fund Balance of Governmental Funds ........................................................................ 90
Governmental Activities Tax Revenues by Source ..................................................... 91
Changes in Fund Balances of Governmental Funds .................................................... 92
Direct and Overlapping Governments ........................................................................ 93
Assessed Value of Taxable Property .......................................................................... 94
Principal Property Taxpayers ..................................................................................... 96
Property Tax Levies and Collections .......................................................................... 97
Ratios of Outstanding Debt by Type .......................................................................... 98
Ratios of General Bonded Debt Outstanding .............................................................. 99
Direct and Overlapping Governmental Activities Debt ............................................. 100
Legal Debt Margin Information ............................................................................... 101
Demographic and Economic Statistics ..................................................................... 102
Principal Employers ............................................................................................... 103
Full-Time Equivalent City Government Employees by Function ............................... 104
Operating Indicators by Function ............................................................................. 105
Capital Asset Statistics by Function ......................................................................... 106
INTRODUCTORY SECTION
1
CITY OF SARATOGA
CITY HALL
13777 FRUITVALE AVENUE
SARATOGA, CALIFORNIA 95070
(408) 868-1200
November 8, 2010
Honorable Mayor and City Council,
The Comprehensive Annual Financial Report (CAFR) of the City of Saratoga for the year ended June 30,
2010 is hereby submitted as mandated by applicable statutes. These statutes require that the City of Saratoga
annually issue a report on its financial position and activity, and that an independent firm of certified public
accountants audit this report. Responsibilities for both the accuracy of the data and the completeness and
fairness of the presentation, including all disclosures, rests with the City's management. The information in
this report is intended to present the reader with a comprehensive view of the City’s financial position and the
results of its operations for the fiscal year ending June 30, 2010, along with additional disclosures and
financial information designed to enable the reader to gain an understanding of the City’s financial activities.
This report was prepared as prescribed in Governmental Accounting Standards Board (GASB) Statement No.
34, Basic Financial Statements and Management’s Discussions and Analysis-for State and Local
Governments. This GASB Statement requires that management provide a narrative introduction, overview,
and analysis to accompany the basic financial statements in the form of Management’s Discussion and
Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in
conjunction with it.
THE REPORTING ENTITY AND ITS SERVICES
The City, incorporated in 1956, is located 40 miles south of San Francisco in the Santa Clara Valley. The
City currently covers a land area of approximately 12 square miles and contains a population of 31,997 at
January 1, 2010 as reported by the Department of Finance. The City is a general law city of the State of
California and operates under a council-manager form of government. Policymaking and legislative
authority are vested in the City Council, which consists of a Mayor, Vice Mayor and three additional council
members. City Council members are elected at-large for staggered four-year terms. The Mayor is selected
annually by the City Council. The City Council is responsible for, among other things, passing ordinances,
adopting the budget, appointing members to the City’s seven advisory commissions and hiring the City
Manager and City Attorney. The City Manager is responsible for implementing the policies and ordinances of
the City Council, overseeing the daily operations of the City, and recommending appointments of the City's
department directors to the City Council.
The City provides a limited range of services including public safety, development regulation, public works,
community and recreation activities and events, and general administrative functions. As a minimal service
city, activities are supplemented through numerous contracts with others. Contracted services include, but
are not limited to, public safety, infrastructure maintenance, engineering services, legal services and
recreation activities. The City is also committed to citizen participation in the evaluation, expansion and
enhancement of services.
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Saratoga residents who wish to assist the City Council in forming government policy may do so by serving
on an advisory commission. The commissions all act in an advisory capacity to the City Council, and are
comprised of the Heritage Preservation Commission, Library Commission, Parks and Recreation
Commission, Planning Commission, Public Safety Commission, and Youth Commission.
The financial reporting entity (the City) includes all the fund activity of the primary government, as well as
all of its component units. Component units are legally separated entities for which the City is fully
accountable. The City’s Saratoga Public Financing Authority (PFA) component unit which provided
financial oversight of local bond obligations was finalized in FY 2005/06. The Authority’s final financial
report was issued for FY 2006/07. Blended component units, although legally separate entities, are in
substance, part of the City’s operations and data from these units are combined with data of the City.
Accordingly, the operations of the Landscaping and Lighting Assessment Districts are reported in the City’s
financial statements.
ECONOMIC CONDITIONS AND OUTLOOK
The financial structure of Saratoga with its mostly built-out residential neighborhoods and limited
commercial development means that the two typically largest sources of revenue for cities—property tax and
sales tax—will result in minimal growth in future years. In addition, while Proposition 1A protects the city
from further ongoing unrestrained State takeaways of tax revenues, under the current budget crisis, the City
expects to see shortfalls in unprotected State or County based funding, and temporary borrowings of property
tax revenues permitted under Proposition 1A. With this in mind the City continues to restrict operations to
minimal services and prepare for funding impacts. Capital improvements will continue to be funded with
residual funding and grant moneys as funding levels allow.
On a positive note the City began receiving a significant increase in property tax revenues due to the passage
of Assembly Bill 117. This legislation, effective with the 2006/07 fiscal year, increased the property tax
percentage allocated to the City as a result of the Tax Equity Allocation (TEA) formula. Assembly Member
Cohn sponsored the bill which resulted from a joint effort of the City of Saratoga, Santa Clara County and 3
other affected cities – Cupertino, Monte Sereno and Los Altos Hills. While the TEA legislation restored the
cities to the full “low tax” level of 7%, the State required the cities to continue to remit the County’s ERAF
rate on these funds so that the bill would have no effect on the State budget. The ERAF rate the County
remits is 47.7%, compared to the City of Saratoga’s rate of 17.14%, resulting in a significant impact to the
revenues received.
FINANCIAL INFORMATION AND MAJOR INITIATIVES
Management of the City is responsible for establishing and maintaining an internal control structure designed
to ensure that the assets of the City are protected from loss, theft or misuse and to ensure that adequate
accounting data is compiled to allow for the preparation of financial statements in conformity with generally
accepted accounting principles. The internal control structure is designed to provide reasonable, but not
absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1)
the cost of a control should not exceed benefits likely to be derived, and (2) the valuation of costs and benefits
requires estimates and judgments by management.
As a recipient of federal, state and local financial assistance, the City is also responsible for guaranteeing that
an adequate internal control structure is in place to ensure and document compliance with applicable laws and
3
regulations related to these programs. This internal control structure is subject to periodic evaluation by the
City’s management.
The City has practiced a passive approach to investments and maintains flexibility by managing a pooled
cash system. Under the pooled cash concept, the City invests the cash of all funds with maturities planned to
coincide with cash needs. Idle cash is invested in certain eligible securities as constrained by law and further
limited by the City’s investment policy. The goals of the City’s investment policy are safety, liquidity and
yield.
In addition, the City maintains extensive budgetary controls. The objective of these controls is to ensure
compliance with legal provisions embodied in the annual appropriated budget approved by the City Council.
Activities of the general fund, special revenue funds, capital projects funds and debt service funds are
included in the annual appropriation.
The level of budgetary control (i.e., the level at which expenditures cannot exceed the appropriated amount)
is at the fund level. The City also maintains an encumbrance accounting system as another method of
maintaining budgetary control. Encumbered amounts lapse at year-end with the exception of the Capital
Improvements Projects, which are multiple-year projects. However, outstanding encumbrances of a material
nature are reviewed by the responsible department and in some cases a recommendation is made to the City
Council to take action by Resolution to re-appropriate these funds into the following year’s budget.
The FY 2009/10 budget focused on maintaining service levels in anticipation of further reductions in the
City’s revenue sources due to the weakening economy. Departmental budgets were held or reduced to non-
expansive levels. The City prepared for additional takeaways by the State due to the publicity of the State’s
struggle with their budget. With decreasing resources, the FY 2009/10 budget process continued its focus on
operational efficiencies to streamline services, the alignment of fees with services provided to the public,
short-term eliminations of operational resources where available, and strengthening the organization’s
tracking and communication of City operations.
OTHER INFORMATION
Independent Audit – California law requires cities to prepare an annual audit by an independent certified
public accountant. In addition to meeting the requirements set forth in statutes, the audit was also designed to
meet the requirements of the federal Single Audit Act of 1984, as amended, and the related U.S. Office of
Management and Budget’s Circular. Generally accepted auditing standards set forth in the General
Accounting Office’s Government Auditing Standards were used by the auditors in conducting the
engagement. The auditor’s unqualified report is included in the financial section of this report. Vavrinek,
Trine, Day & Co., LLP Certified Public Accountants performed the City’s Fiscal Year 2009/10 financial
audit.
Awards – The Government Finance Officers Association (GFOA) of the United States and Canada awarded a
Certificate of Achievement to the City for its Excellence in Financial Reporting on the CAFR for the fiscal
year ended June 30, 2009. In order to be awarded a Certificate of Achievement, the City published an easily
readable and efficiently organized financial report. This report satisfied both generally accepted accounting
principles and applicable legal requirements.
The Certificate of Achievement is valid for a period of one year. We believe our current CAFR continues to
meet the Certificate of Achievement program’s requirements, and plan on submitting it to the GFOA to
determine its eligibility for another certificate.
4
Acknowledgements – This CAFR represents the culmination of numerous hours of hard work expended by
many individuals in the Finance & Administrative Services Department. In particular, we would like to
express our appreciation to Robert Edris, Sr. Accountant for his exemplary preparation of this annual
financial report, and to our supporting staff members: Ann Xu, Accountant; Julie Ingraham, Karen Caselli,
and Melanie Whitaker, Accounting Technicians for all their assistance with the audit and exemplary services
throughout the year. Furthermore, we would like to thank Vavrinek, Trine, Day & Co. LLP, CPA’s for their
helpful assistance in the preparation of this report. Finally, we would like to give credit to the City Council
for their ongoing interest and support in planning, conducting and advising on the operations of the City in a
responsible and representative manner.
Respectfully submitted,
Dave Anderson Mary Furey
City Manager Finance and Administrative Services Director
5
6
CITY OF SARATOGA
ELECTED OFFICIALS AND
ADMINISTRATIVE PERSONNEL
As of June 30, 2010
CITY COUNCIL
Kathleen King - Mayor
Jill Hunter – Vice Mayor
Chuck Page
Howard Miller
Manny Cappello
CITY STAFF
Dave Anderson – City Manager
Barbara Powell – Assistant City Manager
Ann Sullivan – City Clerk
Mary Furey – Finance & Administrative Services Director
John Livingstone – Community Development Director
John Cherbone – Public Works Director
Michael Taylor – Recreation & Facilities Director
CITY ATTORNEY
Richard S. Taylor – Shute, Mihaly & Weinberger
INDEPENDENT AUDITORS
Vavrinek, Trine, Day & Co., LLP, CPA
7
City of Saratoga - Organization Chart
CityAttorneyCity Manager
Executive Assistant
.60
CommunityDevelopment
Department
Community Development
Director
Administrative AnalystII
1
Human Resources
Division
1 HR Manager
Facilities Division
1Facility Maint.Supervisor
1 Facility Maint.
Leadworker
2 Facility Maint. Workers
.60 Facility Coordinator
Planning Division
1 Senior Planner2 Assistant Planners1 Arborist1 Office Specialist
Engineering Division
1 Sr. Civil Engineer1 Associate Engineer1 Administrative Analyst .75 Office Specialist
Parks Division
1 Manager -Parks
1 Park Maint. Leadworker
1 Park Maint. Specialist
6 Park Maint. Workers
.50 Office Specialist III
Finance Division1 Accountant 3 Accounting Technicians
Information Technology
Division
1 IT Analyst
Office of the City Clerk
1CityClerk
.15 Deputy City Clerk
Financeand Administrative
Services Department
Finance and Administrative
Services Director
Recreation and Facilities
Department
Recreation and Facilities
Director
PublicWorks Department
Public Works Director
Recreation Services
Division
1 Senior Recreation
Supervisor
1 Recreation Supervisor
1 Office Specialist
Streets and Fleet Division
1 Manager -Streets and Fleet
1 Street Maint. Leadworker
1 Street Maint. Specialist
4 Street Maint. Workers
.50 Office Specialist
BuildingDivision
1 Building Official
2 Building Inspectors
1 Code Compliance Specialist
1 Plan Check Engineer
1 Office Specialist
CitizenAdvisory
Commissions and
Citizens of Saratoga
ElectedCity Council
CityManager's Department
Assistant City Manager/City Manager's
Department Director
8
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FINANCIAL SECTION
9
INDEPENDENT AUDITOR’S REPORT
To Honorable Mayor and Members of the
City Council of the City of Saratoga
Saratoga, California
We have audited the accompanying financial statements of the governmental activities, each major fund, and the
aggregate remaining fund information of City of Saratoga (the City), as of and for the year ended June 30, 2010,
which collectively comprise the City’s basic financial statements as listed in the table of contents. These financial
statements are the responsibility of the City’s management. Our responsibility is to express opinions on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America
and the standards applicable to financial audits contained in Governmental Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for
our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective
financial position of the governmental activities, each major fund, and the aggregate remaining fund information
of the City of Saratoga, as of June 30, 2010, and the respective changes in financial position, and where
applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted
in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated November 8, 2010, on
our consideration of the city’s internal control over financial reporting and on our tests of its compliance with
certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that
report is to describe the scope of our testing of internal control over financial reporting and compliance and the
results of that testing, and not to provide an opinion on the internal control over financial reporting or on
compliance. That report is an integral part of an audit performed in accordance with Government Auditing
Standards and should be considered in conjunction with this report in considering the results of our audit.
5000 Hopyard Road, Suite 335 Pleasanton, CA 94588 Tel: 925.734.6600 Fax: 925.734.6611 www.vtdcpa.com
F R E S N O L A G U N A H I L L S P L E A S A N T O N R A N C H O C U C A M O N G A P A L O A L T O S A C R A M E N T O
10
The required supplementary information, such as management’s discussion and analysis, and the required
supplementary information as listed on the table of contents, are not a required part of the basic financial
statements but are supplementary information required by accounting principles generally accepted in the
United States of America. We have applied certain limited procedures, which consisted principally of
inquiries of management regarding the methods of measurement and presentation of the required
supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City’s basic financial statements. The introductory section, and the combining individual
non-major fund statements and schedules, and statistical section, as listed in the table of contents, are
presented for purposes of additional analysis and are not a required part of the basic financial statements.
The combining individual non-major fund statements and schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a whole. The introductory and
statistical sections have not been subjected to the auditing procedures applied in the audit of the basic
financial statements and, accordingly, we express no opinion on them.
Pleasanton, California
November 8, 2010
CITY OF SARATOGA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2010
11
INTRODUCTION
The following provides a narrative overview and analysis of the fiscal operations during the fiscal year
ended June 30, 2010 for the City of Saratoga. The Management Discussion and Analysis (MD&A) is to
be read in conjunction with the annual Transmittal Letter and the Basic Financial Statements.
FISCAL YEAR 2009/10FINANCIAL HIGHLIGHTS
The City's total net assets were $123,017,751, comprised of $108,965,864 for investment in
capital assets, net of depreciation and related debt; $5,519,025 restricted for specific purposes;
and $8,532,862 unrestricted net assets (reference pg #23).
Total City revenues were $18,901,842 which consists of program revenue of $6,536,962 and
general revenues of $12,364,880 (reference pg #24).
The City’s expenses were $18,741,679 (reference pg #24).
Total Governmental Fund’s fund balances were $13,529,703, consisting of $8,010,678 in the
General Fund, $3,705,941 in the Capital Improvement Funds, and $1,813,084 in the Other
Governmental Funds (reference pg #25).
General Fund revenues were $15,245,049, while General Fund expenditures were $15,138,899
(reference pg #27).
THE BASIC FINANCIAL STATEMENTS
The Basic Financial Statements are comprised of 1) Government-wide (City-wide) Financial Statements, and;
2) Fund Financial Statements. These two sets of financial statements provide the reader two different
perspectives of the City's financial activities and financial position.
Government-Wide Financial Statements provide a longer-term view of the City's activities as a whole, and
comprise the Statement of Net Assets and the Statement of Activities. The Statement of Net Assets provides
information about the financial position of the City as a whole, including all its capital assets and long-term
liabilities on a full accrual basis, similar to that used by corporations. The Statement of Activities provides
information about all the City's revenues and all its expenses, also on a full accrual basis, with the emphasis
on measuring net revenues and/or expenses for each of the City's programs. The Statement of Activities
explains in detail the change in Net Assets for the fiscal year.
All of the City's activities are required to be grouped into government activities and business-type activities.
The entire amount in the Statement of Net Assets and the Statement of Activities are also required to be
separated into governmental activities or business-type activities in order to provide a summary of these two
activities of the City as a whole. In the case of the City of Saratoga, there are no business-type activities as of
June 30, 2010.
Fund Financial Statements report the City's operations in more detail than the government-wide statements
and focus primarily on the short-term activities of the City's general fund and other major funds. The Fund
Financial Statements measure only current revenues and expenditures and fund balances; they exclude capital
assets, long-term debt, and other long-term amounts.
CITY OF SARATOGA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2010
12
Major funds account for the major financial activities of the City and are presented individually, while the
activities of non-major funds are presented in summary, with subordinate schedules presenting the detail for
each of these other funds. Major funds are explained below.
The Government-Wide Financial Statements
Government-wide financial statements are prepared on the accrual basis, which means they measure the flow
of all economic resources of the City as a whole. The Statement of Net Assets and the Statement of Activities
present information about the following:
Governmental Activities - All of the City's basic services are considered to be governmental activities,
including general government, community development, public safety, transportation, and, culture and
leisure. These services are supported by general City revenues such as taxes, and by specific program
revenues such as developer and recreation program fees.
Business-Type Activities - This category includes enterprise activities such as water, sewer, and utilities.
Unlike governmental services, these services are fully supported by charges paid by users based on the
amount of services they use. The City of Saratoga does not have any business-type activities at this time.
Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been
segregated for specific activities or objectives. The City, like other local governments, uses fund
accounting to ensure and demonstrate compliance with finance-related legal requirements.
Fund financial statements provide detailed information about each of the City's most significant funds, called
major funds. The concept of major funds, and the determination of which are major funds, was established
by GASB Statement 34 and replaces the concept of combining like funds and presenting them in total.
Instead, each major fund is presented individually, with all non-major funds summarized and presented only
in a single column. Subordinate schedules present the detail of these non-major funds. Major funds present
the major activities of the City for the fiscal year, and may change from year to year as a result of changes in
the pattern of the City's activities. The City's funds are segregated into three categories: governmental funds,
proprietary funds, and fiduciary funds.
Governmental Funds - The City's basic services are reported in governmental funds, which focus on how
money flows into and out of those funds and the balances available at year-end. Financial statements are
prepared on the modified accrual basis, which means they measure only current financial resources and uses.
Carrying amounts for capital assets and other long-lived assets, along with long-term liabilities are not
presented on the balance sheet in the governmental fund financial statements. Unlike the government-wide
financial statements, governmental fund financial statements focus on near-term inflows and outflows of
spendable resources, as well as on balances of spendable resources available at the end of the fiscal year.
Such information may be useful in evaluating the City's near-term financing requirements.
Proprietary Funds – Internal service funds are an accounting device used to accumulate and allocate costs
internally among the City’s various functions. The City uses internal service funds to account for liability
and risk management, workers compensation, office supplies, information technology services, vehicle
and building maintenance, and vehicle and information technology equipment replacement. Because the
internal service funds benefit the governmental functions, they have been included with the governmental
activities in the government-wide financial statements.
CITY OF SARATOGA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2010
13
Fiduciary Funds – These funds account for assets held by the City in a trustee capacity or as an agent for
individuals, private organizations, other governmental units, and/or other funds. Fiduciary funds are not
reflected in the government-wide financial statements because these resources are not available to support
the City's programs. The City maintains one such fund, the Community Access Television Fund, which
acts as trustee for the CATV Foundation Board for investment purposes.
NOTES TO THE FINANCIAL STATEMENTS
Notes to the Financial Statements provide additional information that is essential to a full understanding of
the data provided in the government-wide and fund financial statements. The notes can be found
immediately following the fund financial statements.
REQUIRED SUPPLEMENTARY INFORMATION
Required supplementary information other than through the MD&A follows the Notes and includes a
budgetary comparison for the General Fund as presented in the governmental fund financial statements,
and information on the modified approach for city streets and infrastructure.
SUPPLEMENTARY INFORMATION
Combining and individual fund statements and schedules are included to provide information for non-major
governmental funds, special revenue funds, fiduciary funds, and uses of capital assets. An un-audited
statistical section provides historical and current data on financial trends, revenue and debt capacity,
demographic and economic information, and operating information.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
Net assets may serve over time as an indicator of the City's financial position. The City's Total Net Assets
increased $160,163, from $122,857,588 in FY 2008/09 to $123,017,751 in FY 2009/10.
The most significant portion of the City's net assets ($108,965,864 or 88.6%) accounts for its investment in
capital assets, (e.g., land, buildings, general government infrastructure, equipment, etc.;) less any related debt
used to acquire those assets that are still outstanding. These capital assets represent infrastructure which
provides services to the citizens, consequently, these assets are not available for future spending.
$5,519,025 or 4.5% of the City's net assets are subjected to external restrictions on how they may be used. Of
these restricted net assets, $4,057,300 is restricted for capital projects, $892,593 is for repayment of long-term
debt and $569,132 is restricted for housing activities and lighting and landscaping assessment districts.
The remaining $8,532,862 or 6.9% of the City's net assets are unrestricted and may be used to meet the City's
ongoing obligations to citizens and creditors.
CITY OF SARATOGA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2010
14
Governmental Activities
20102009
Assets
Current assets16,740,241$ 18,182,606$
Non-current assets58,337 71,670
Capital assets121,920,864 122,102,516
Total Assets 138,719,442 140,356,792
Liabilities
Current liabilities2,794,845 4,317,341
Long-term debt12,906,846 13,181,863
Total Liabilities 15,701,691 17,499,204
Net Assets
Investment in capital assets, net of related debt108,965,864 108,817,516
Restricted for Capital Project4,057,300 3,865,374
Restricted for Debt Service892,593 931,361
Restricted for Special Projects569,132 484,088
Unrestricted8,532,862 8,759,249
Total Net Assets 123,017,751$ 122,857,588$
Net Assets
CITY OF SARATOGA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2010
15
Governmental ActivitiesIncrease
Functions/Programs20102009(Decrease)
Program Revenues
Charges for services5,588,740$ 5,768,277$ (179,537)$
Operating grants and contributions275,035 228,534 46,501
Capital grants and contributions673,187 338,768 334,419
Total Program Revenues 6,536,962 6,335,579 201,383
General Revenues
Property taxes8,371,322 8,335,805 35,517
Sales taxes954,574 1,043,034 (88,460)
Local taxes560,040 663,053 (103,013)
Franchise taxes1,663,657 1,656,716 6,941
Motor vehicle in-lieu101,218 116,273 (15,055)
Intergovernmental revenues521,852 473,989 47,863
Investment earnings100,731 397,116 (296,385)
Other revenues91,486 148,284 (56,798)
Total General Revenues 12,364,880 12,834,270 (469,390)
Expenses
General and intergovernmental services3,729,036 5,595,474 (1,866,438)
Public safety4,338,598 4,210,763 127,835
Public works6,534,902 7,643,545 (1,108,643)
Community services1,710,769 1,633,997 76,772
Community development services1,751,348 1,999,754 (248,406)
Interest on long-term debt (unallocated)677,026 696,800 (19,774)
Total Expenses 18,741,679 21,780,333 (3,038,654)$
Increase / (Decrease) in Net Assets160,163 (2,610,484)
Net Assets, Beginning of Year 122,857,588 125,468,072
Net Assets, End of Year 123,017,751$ 122,857,588$
Statement of Changes in Net Assets
As shown in the above Statement of Changes in Net Assets schedule, the net change in program revenues
from the prior fiscal year for governmental activities is an increase of $201,383. The net change in
general revenues from the prior year is a decrease of $469,390, for a total decrease in revenues of
$268,007. The net change in expenses from the prior year is a decrease of $3,038,654.
With total program and general revenues for fiscal year 2009/10 at $18,901,842 and total expenses at
$18,741,679, the net activity resulted in an increase in Net Assets of $160,163.
CITY OF SARATOGA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2010
16
An analysis and graphical representation of the changes in revenues and expenditures by type of
significant events follows:
CHART OF REVENUE INCREASE OR (DECREASE)
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
FY 2008/09 FY 2009/10
Total Revenues by Category
Increases in Revenues
A $46,501 increase in operating grants is primarily the result of the State’s payment delay for
COPS/SLESF funds as funding due in fiscal year 2008/09 was made in fiscal year 2009/10. A
$334,419 increase in capital grants reflects a large street resurfacing grant reimbursement completed
in FY 2009/10.
The small increase of $35,517 (.43%) in property tax revenue is the net of increases in property tax
assessment values from real estate turnover of long-held properties, against decreases in overall
assessed property values. The increase is significantly lower than in previous years due to the
ongoing decrease in housing prices during FY 2009/10.
Intergovernmental revenues reflect an increase of $47,863 due primarily to an increase in Gas Tax
revenues from the prior fiscal year.
Decreases in Revenues
A decrease of $179,537 in Charge for Services reflects the ongoing impact to development service
revenues caused by the economic downturn and credit crunch. The continued decline was offset by
an approximate $80,000 increase in recreation revenues resulting from new dance programs.
CITY OF SARATOGA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2010
17
Sales tax and local taxes also decreased in fiscal year 2009/10 as a result of the economic downturn.
Sales tax decreased by $88,460 and local taxes by $103,013. The portion of the business license tax
and the construction tax that are based on building permits comprised the majority of the decrease in
local taxes, with the remainder of the decrease from the City’s hotel tax.
Investment Earnings decreased by $296,385 (75%) from the prior year due to historically low interest
rates at under 1% during the fiscal year
Other Revenues represents miscellaneous refunds and reimbursements, proceeds from sales, cell
tower leases, and minor oddities. Revenues will fluctuate from year to year as these types of receipts
are typically unplanned and one-time occurrences. A continued emphasis on categorizing revenues
into proper programs and categories has also contributed to the $56,798 decrease in this category.
CHART OF EXPENSE INCREASE OR (DECREASE)
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
FY 2008/09 FY 2009/10
TotalExpensesbyCategory
The net change in expenses for Governmental Activities was a decrease of $3,038,654. Expenditures
with significant events include:
Increases in Expenses
Public Safety expenses increased by $127,835 due to an increase in the Sheriff’s Office contract cost.
The $76,772 increase in Community Services expenses is due to increases in Recreation program
costs resulting from additional dance program activities and staffing costs.
Decreases in Expenses
A $1,866,438 decrease in the General and Intergovernmental Services category from the prior year is
the result of strategic reductions in administrative staffing costs, operational expenses, and internal
service charges to offset reductions in revenues.
CITY OF SARATOGA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2010
18
A $1,108,643 decrease in the Public Works category reflects reductions in non-capital maintenance
costs with the emphasis shifting to capital improvements rather than maintenance projects during the
fiscal year.
The community development category of expenditures decreased by $248,406 with the continued
downturn in services provided.
MAJOR AND OTHER GOVERNMENTAL FUNDS:CHANGE IN FUND BALANCE
A summary of the changes in fund balance of the major and other government funds are presented below:
Other
CapitalGovernmental
GeneralImprovementFunds
Total Revenues15,245,049$ 2,160,466$ 1,573,432$
Total Expenditures15,138,899 2,578,501 1,396,353
Revenues Over
(Under) Expenditures106,150 (418,035) 177,079
Transfers in325,842 845,979 -
Transfers out(650,000) (232,983) (133,838)
Net change in fund balances(218,008) 194,961 43,241
Beginning of year 8,228,686 3,510,980 1,769,843
End of year8,010,678$ 3,705,941$ 1,813,084$
Major Funds
Included in the Major Funds are the General Fund and the Capital Improvement Fund. The Other
Governmental funds include twenty-four Lighting and Landscape Assessment Districts, accounted for as
one fund in the financials, the Community Development Block Grant Fund, the Library Bond Debt
Service Fund, and the Library Expansion Capital Project Fund. The net change of the Major and Other
Governmental Funds fiscal year transactions is an increase of $20,194.
General Fund - As shown in the preceding Major Funds table, the net change in the General Fund's Fund
Balance was a decrease of $218,008. A net loss resulted from the net of operating revenues coming in
just slightly over operating expenditures, and the transfer out of $650,000 to the Capital Improvement
Program.
Revenues are budgeted conservatively based upon prior year experience and specific information, while
expenditures are limited to anticipated program needs at not-to-exceed projected funding levels. A large
factor which contributed to the net loss was the more than $600,000 decrease in General Fund revenues
from the prior year due to continued drops in development permits and fees, construction related taxes,
and interest earnings.
Capital Improvement Project Fund - As shown in the table above, the net change in the Capital
Improvement Fund has an increase of $194,961 which is due to timely grant reimbursements and a net of
$612,996 of transfers into the capital program to offset the operational shortfall.
CITY OF SARATOGA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2010
19
Other Governmental Funds - As shown in the table, there was a net increase of $43,241 in the Other
Governmental Funds, primarily due to lower operational costs in the landscape and lighting funds this
fiscal year.
GENERALFUND–BUDGETARYHIGHLIGHTS
Changes from the City's General Fund original budget to the final budget are detailed in the Required
Supplementary Information Section along with a comparison to actual activity for the year ended.
Changes to the City's budget that increase or decrease appropriations in a fund must be approved by a
resolution of the City Council. Modifications to the budget that are a realignment of fiscal activities with
no impact to the fund's bottom line may be approved by the City Manager.
Adopted to Final Budget
Fiscal Year Ended June 30, 2010
AdoptedBudgetFinal
BudgetAdjustmentsBudget
Expenditures15,816,578$ (478,033) 15,338,545$
Transfers out253,500$ 396,500 650,000$
The General Fund adopted expenditure budget was $15,816,578. At the City’s mid-year review, a
revenue shortfall was anticipated so various departmental expenditures were reduced by $310,000 and
funding for the City’s internal service funds was reduced by $168,033, reducing the General Fund’s
budget by $478,033.
CAPITAL ASSETS
The City of Saratoga elected to use the "Modified Approach" as defined by GASB Statement No. 34 for
infrastructure reporting in which eligible infrastructure capital assets are not required to be depreciated if
the following requirements are met:
The City manages the assets using an asset management system which requires that the City (1)
perform an up-to-date inventory; (2) perform condition assessments and summarize the results using
a measurement scale; and (3) estimate the annual amount to preserve the assets at the established
condition assessment level.
The City documents that the eligible infrastructure capital assets are being preserved approximately
at or above the established and disclosed condition assessment level.
The City policy is to achieve an average Pavement Condition Index (PCI) rating of 70 for all streets. The
City achieved the 70 rating with 86% of streets rated as Excellent to Good, 13% of streets are rated as
"Poor", and 1% of streets are rated as "Very Poor". The City spent $771,386 to maintain and preserve
eligible infrastructure assets. For more detailed information on Capital Assets activity, please refer to
Note 2 in the section entitled "Notes to the Basic Financial Statements" and "Required Supplementary
Section". The next assessment study has been contracted for September, 2010.
CITY OF SARATOGA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2010
20
As of June 30, 2010, the City had $121,920,864 invested in a variety of capital assets, as reflected in the
following schedule, which represents a decrease of $181,652 or less than a 1% decrease from the prior
year.
Governmental Activities
20102009
Land 12,984,078$ 10,585,106$
Building and structures17,941,650 18,261,779
Machinery and equipment680,366 470,646
Infrastructure85,871,410 86,189,639
Construction in progress4,443,360 6,595,346
Total Capital Assets, Net of Depreciation121,920,864$ 122,102,516$
Capital Assets at Year End
Net of Depreciation
The following reconciliation summarizes the changes in Capital Assets.
BalanceBalance
July 1, 2009AdditionsRetirementsJune 30, 2010
Land10,585,106$ 2,398,972$ -$ 12,984,078$
Building and structures23,156,758 256,005 - 23,412,763
Machinery and equipment2,026,140 383,494 (127,790) 2,281,844
Infrastructure103,549,229 876,278 104,425,507
Construction in progress6,595,346 1,808,376 (3,960,362) 4,443,360
Depreciation(23,810,063) (1,944,415) 127,790 (25,626,688)
Total Capital Assets, Net of Depreciation122,102,516$ 3,778,710$ (3,960,362)$ 121,920,864$
Changes in Capital Assets
Major capital projects in progress during the fiscal year include the following:
Kevin Moran Park Improvements - $116,132
Library HVAC Upgrade - $276,548
Saratoga Avenue Resurfacing - $257,716
UPPR / DeAnza Trail - $251,007
Prospect Road Medians - $99,373
Additional information on Capital Assets is included in Note 6 to the financial statements.
DEBT ADMINISTRATION
The net change in outstanding debt for the City of Saratoga is a decrease of $220,747. During the fiscal
year, the City did not enter into any new debt structures.
CITY OF SARATOGA
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2010
21
Governmental Activities
20102009
2001 General Obligation Bond12,955,000$ 13,285,000$
Compensated absences693,668 584,415
Total Outstanding Debt 13,648,668$ 13,869,415$
Outstanding Long-Term Obligation at Year End
The current portions of long-term debt ($350,000 and $330,000 for 2010 and 2009, respectively), are
classified as current liabilities in the City's Statement of Net Assets.
2001 General Obligation Bond - During the fiscal year, the City made debt service payments that include
a principal reduction of $330,000 on the City's 2001 General Obligation $15,000,000 bond issue.
Compensated absences are accrued liabilities for vested and unpaid vacation and sick pay. The
compensated absences balance increased during the fiscal year by $109,253 due to an increase in unused
compensated time off.
Additional information on outstanding obligations can be found in Note 7 to the financial statements.
ECONOMIC FACTORS
In September 2006, the City received a significant increase in new property tax revenues on an annual
basis due to the passage of Assembly Bill 117. This legislation effective with FY 2006/07 increases the
amount of property taxes allocated to the City as a result of the TEA (Tax Equity Allocation) formula.
Assembly Member Cohn sponsored the bill which resulted from a joint effort of the City of Saratoga,
Santa Clara County and the three other affected cities - Cupertino, Monte Sereno and Los Altos Hills.
These cities are referred to as "no/low tax cities" and will have restored a proportionate share of the
property taxes which they lost to special legislation in 1989. This resulted in a permanent increase in
general fund property taxes to approximately 5.45% of the 1% ad valorem tax property owners pay.
The economy of the City and its major initiatives for the fiscal year are discussed in the accompanying
Transmittal Letter.
REQUEST FOR FINANCIAL INFORMATION
This financial report is designed to provide a general overview of the City of Saratoga's finances for all of
Saratoga's residents, taxpayers, customers, investors, and creditors. This financial report seeks to
demonstrate the City's accountability for the money it receives. Questions concerning any of the
information provided in this report or requests for additional information should be addressed to the
Administrative Services Department, 13777 Fruitvale Avenue, Saratoga, California 95070.
22
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.
BASIC FINANCIAL STATEMENTS
CITY OF SARATOGA
STATEMENT OF NET ASSETS
JUNE 30, 2010
23
Primary Government
Governmental
Activities
ASSETS
Current Assets:
Cash and investments15,864,455$
Receivables:
Accounts 842,425
Interest 20,028
Loans 13,333
Total Current Assets16,740,241
Noncurrent Assets:
Loans receivable 58,337
Capital Assets:
Non-depreciable66,583,057
Depreciable, net55,337,807
Total Capital Assets121,920,864
Total Noncurrent Assets121,979,201
Total Assets 138,719,442
LIABILITIES
Current Liabilities:
Accounts payable523,533
Accrued payroll 372,018
Other payable 62,173
Interest payable 280,690
Deposits payable 750,387
Unearned revenue 9,621
Claims payable 54,601
Long-term debt - due within one year741,822
Total Current Liabilities2,794,845
Noncurrent Liabilities:
Long-term debt - due in more than one year12,906,846
Total liabilities 15,701,691
Net Assets
Investment in capital assets, net of related debt108,965,864
Restricted for:
Capital projects funds4,057,300
Debt service 892,593
Special projects 569,132
Total Restricted5,519,025
Unrestricted 8,532,862
Total Net Assets 123,017,751$
The accompanying notes are an integral part of these financial statements
CITY OF SARATOGA
STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS
JUNE 30, 2010
24
Net (Expense)
Revenue and
Changes in
Program RevenuesNet Assets
Primary
OperatingCapitalGovernment
Charges forGrants andGrants andGovernmental
Functions/Programs ExpensesServicesContributionsContributionsTotalActivities
Primary Government:
Governmental Activities:
General and intergovernmental services3,729,036$ 125,076$ -$ -$ 125,076$ (3,603,960)$
Public safety4,338,598 425,378 144,175 - 569,553 (3,769,045)
Public works6,534,902 2,534,991 7,048 673,187 3,215,226 (3,319,676)
Community services1,710,769 916,730 - - 916,730 (794,039)
Community development services1,751,348 1,586,565 123,812 - 1,710,377 (40,971)
Interest on long-term debt (unallocated)677,026 - - - - (677,026)
Total 18,741,679$ 5,588,740$ 275,035$ 673,187$ 6,536,962$ (12,204,717)$
General Revenues:
Taxes
Property taxes8,371,322
Sales taxes954,574
Local taxes560,040
Franchise taxes1,663,657
Motor vehicle-in-lieu101,218
Total taxes11,650,811
Intergovernmental521,852
Investment earnings100,731
Other revenues91,486
Total General Revenues12,364,880
Change in Net Assets160,163
Net Assets - Beginning of Year122,857,588
Net Assets - End of Year123,017,751$
The accompanying notes are an integral part of these financial statements
CITY OF SARATOGA
GOVERNMENTAL FUNDS - BALANCE SHEET
JUNE 30, 2010
25
OtherTotal
Capital GovernmentalGovernmental
GeneralImprovementFundsFunds
ASSETS
Cash and investments9,032,631$ 3,502,303$ 1,830,951$ 14,365,885$
Receivables:
Accounts467,810 296,570 11,477 775,857
Interest17,892 - 2,136 20,028
Loans- - 71,670 71,670
Total assets 9,518,333$ 3,798,873$ 1,916,234$ 15,233,440$
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable363,550$ 91,071$ 21,859$ 476,480$
Accrued payroll331,531 1,861 - 333,392
Deposits payable750,387 - - 750,387
Other payable62,173 - - 62,173
Deferred revenue14 - 81,291 81,305
Total liabilities 1,507,655 92,932 103,150 1,703,737
Fund Balances:
Reserved for:
Petty cash1,300 - - 1,300
Debt service- - 892,593 892,593
Unreserved, designated for:
Operations2,889,077 - - 2,889,077
Economic uncertainty1,500,000 - - 1,500,000
Environmental services563,182 - - 563,182
Community development services632,380 - - 632,380
Grant matching600,000 - - 600,000
Hillside Reserve300,000 - - 300,000
Uncollected deposits44,791 - - 44,791
Carryforward Reserve68,600 68,600
Capital projects reserve126,983 126,983
Unreserved, undesignated, reported in:
General fund1,284,365 - - 1,284,365
Special revenue funds- - 569,132 569,132
Capital projects funds- 3,705,941 351,359 4,057,300
Total fund balances 8,010,678 3,705,941 1,813,084 13,529,703
Total liabilities and fund balances 9,518,333$ 3,798,873$ 1,916,234$ 15,233,440$
The accompanying notes are an integral part of these financial statements
Major Funds
CITY OF SARATOGA
RECONCILIATION OF THE GOVERNMENTAL FUNDS
BALANCE SHEET TO THE STATEMENT OF NET ASSETS
JUNE 30, 2010
26
Total Fund Balances - Total Governmental Funds 13,529,703$
Amounts reported for governmental activities in the statement of net assets were
different because:
Capital assets used in governmental activities were not current financial resources. Therefore,
they were not reported in the Governmental Funds Balance Sheet. The capital assets were
adjusted as follows:
Non-depreciable capital assets66,583,057
Depreciable capital assets, net55,046,268
Total Capital Assets121,629,325
Interest payable on long-term debt did not require current financial resources. Therefore,
interest payable was not reported as a liability in Governmental Funds Balance Sheet.(280,690)
Internal service funds are used by management to charge the costs of office stores,
vehicle and equipment maintenance and replacement, information services and replacement,
building maintenance, risk management, and workers compensation. The assets and
liabilities of the internal service funds are included in the governmental activities in
the statement of net assets1,655,207
Long-term receivables were not current available resources and therefore, were offset by
a deferred revenue amount equal to the net receivable in the governmental funds.132,874
Long-term liabilities were not due and payable in the current period. Therefore, they were not
reported in the Governmental Funds Balance Sheet. The long-term liabilities were adjusted
as follows:
General obligation bonds(12,955,000)
Compensated absences(693,668)
Total Long-Term Liabilities(13,648,668)
Net Assets of Governmental Activities 123,017,751$
The accompanying notes are an integral part of these financial statements
CITY OF SARATOGA
STATEMENT OF REVENUES, EXPENDITURES AND CHANGE
IN FUND BALANCE
FOR THE YEAR ENDED JUNE 30, 2010
27
OtherTotal
CapitalGovernmentalGovernmental
GeneralImprovementFundsFunds
REVENUES:
Property taxes8,185,390$ -$ 186,006$ 8,371,396$
Special assessments8,974 1,237,806 1,246,780
Sales taxes954,574 - - 954,574
Other local taxes560,040 - - 560,040
Licenses & permits1,063,946 424,737 - 1,488,683
Fines & forfeiture350,751 8,010 - 358,761
Intergovernmental - Federal- 430,387 - 430,387
Intergovernmental - State323,837 934,083 - 1,257,920
Intergovernmental - Other34,050 99,712 123,812 257,574
Franchise fees1,663,657 - - 1,663,657
Use of money and property541,305 41,640 12,385 595,330
Other revenue1,558,525 221,897 13,423 1,793,845
Total revenues 15,245,049 2,160,466 1,573,432 18,978,947
EXPENDITURES:
Current:
General and intergovernmental services3,102,397 - - 3,102,397
Public safety4,348,778 - - 4,348,778
Public works 4,353,903 - 375,619 4,729,522
Community services1,222,649 - - 1,222,649
Community development services2,111,172 - - 2,111,172
Capital outlay- 2,578,501 5,458 2,583,959
Debt service:
Principal- - 330,000 330,000
Interest and fiscal charges- - 685,276 685,276
Total expenditures 15,138,899 2,578,501 1,396,353 19,113,753
REVENUES OVER
(UNDER) EXPENDITURES 106,150 (418,035) 177,079 (134,806)
OTHER FINANCING SOURCES (USES):
Transfers in325,842 845,979 - 1,171,821
Transfers out(650,000) (232,983) (133,838) (1,016,821)
Total other financing sources (uses)(324,158) 612,996 (133,838) 155,000
Net change in fund balances (218,008) 194,961 43,241 20,194
FUND BALANCES:
Beginning of year8,228,686 3,510,980 1,769,843 13,509,509
End of year 8,010,678$ 3,705,941$ 1,813,084$ 13,529,703$
The accompanying notes are an integral part of these financial statements.
Major Funds
CITY OF SARATOGA
RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE
GOVERNMENT-WIDE STATEMENT OF ACTIVITIES AND CHANGES IN NET
ASSETS
FOR THE YEAR ENDED JUNE 30, 2010
28
Net Change in Fund Balances - Total Governmental Funds 20,194$
Amounts reported for governmental activities in the Statement of Activities and Changes
in Net Assets were different because:
Governmental Funds report capital outlay as expenditures. However, in the Government-Wide
Statement of Activities and Changes in Net Assets, the cost of those assets was allocated over
their estimated useful lives as depreciation expense. This is the amount of capital assets
recorded in the current period.1,622,628
Depreciation expense on capital assets was reported in the Government-Wide Statement
of Activities and Changes in Net Assets, but it did not require the use of current financial
resources. Therefore, depreciation expense was not reported as expenditures in the
Governmental Funds.(1,675,048)
Internal service funds are used by management to charge the costs of office stores,
vehicle and equipment maintenance and replacement, information services and replacement,
building maintenance, risk management, and workers' compensation. The net revenue
or (excess expenses) of the internal service funds is reported with government activities.(39,942)
Certain revenues were recorded as deferred revenue in the governmental funds because they
did not meet the revenue recognition criteria of availability. However, they were included as
revenue in the Government-Wide Statement of Activities and Changes in Net Assets under
the full accrual basis.3,334
Long-term compensated absences and claims payables were reported in the Government-Wide
Statement of Activities and Changes in Net Assets, but they did not require the use of current
financial resources. Therefore, long-term compensated absences and claims payable were not
reported as expenditures in governmental funds.
Compensated absences(109,253)
Repayment of bond principal was an expenditure in governmental funds, but the repayment
reduced long-term liabilities in the Government-Wide Statement of Net Assets.
Long-term debt repayments330,000
Interest expense on long-term debt was reported in the Government-Wide Statement of
Activities and Changes in Net Assets, but it did not require the use of current financial
resources. Therefore, interest expense was not reported as expenditures in governmental
funds. The following amount represented the change in accrued interest from prior year.8,250
Change in Net Assets of Governmental Activities 160,163$
The accompanying notes are an integral part of these financial statements
CITY OF SARATOGA
STATEMENT OF NET ASSETS
PROPRIETARY FUNDS
JUNE 30, 2010
29
Governmental
Activities -
Internal
Service Funds
ASSETS
Current assets:
Cash and investments1,498,570$
Accounts receivable5,378
Total current assets1,503,948
Noncurrent assets:
Capital assets:
Machinery and equipment714,059
Less: accumulated depreciation(422,520)
Total capital assets (net of
accumulated depreciation) 291,539
Total assets 1,795,487
LIABILITIES
Liabilities:
Current assets:
Accounts payable47,053
Accrued payroll38,626
Other payables54,601
Total current liabilities140,280
NET ASSETS
Investment in capital assets291,539
Unrestricted 1,363,668
Total net assets1,655,207$
The accompanying notes are an integral part of these financial statements
CITY OF SARATOGA
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS
PROPRIETARY FUNDS
FOR THE YEAR ENDED JUNE 30, 2010
30
Governmental
Activities -
Internal
Service Funds
Operating revenues:
Charges for services2,003,010$
Other operating revenues54,618
Total operating revenues2,057,628
Operating expenses:
Cost of services972,136
Administration828,857
Depreciation 141,577
Total operating expenses1,942,570
Operating income115,058
Transfers out (155,000)
Change in net assets(39,942)
Total net assets - beginning 1,695,149
Total net assets - ending1,655,207$
The accompanying notes are an integral part of these financial statements
CITY OF SARATOGA
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
FOR THE YEAR ENDED JUNE 30, 2010
31
Governmental
Activities -
Internal
Service Funds
Cash flows from operating activities:
Receipts from customers and users2,062,188$
Payments to suppliers(1,146,675)
Payments to employees(703,438)
Net cash provided (used) by operating activities212,075
Cash flows from noncapital financing activities:
Operating transfers out(155,000)
Net cash used in nonoperating activities(155,000)
Cash flows from capital activities:
Acquisition of capital assets(12,345)
Net cash provided for the acquisition of capital assets(12,345)
Net increase in cash and cash equivalents44,730
Cash and cash equivalents, beginning of year1,453,840
Cash and cash equivalents, ending of year1,498,570$
Reconciliation of operating income to net cash provided
by operating activities:
Operating income (loss)115,058$
Adjustments to reconcile operating income (loss)
to net cash provided (used) by operating activities:
Depreciation141,577
Change in operating assets and liabilities:
Decrease in accounts receivables4,560
Increase in accounts payable(31,658)
Increase in claims payable(28,615)
Decrease in accured payroll11,153
Net cash provided (used) by operating activities212,075$
CITY OF SARATOGA
STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS
JUNE 30, 2010
32
Agency
Funds
ASSETS
Cash and investments 91,364$
Receivables:
Accounts 18,352
Interest 126
Total assets 109,842$
LIABILITIES
Deposits payable 109,842$
The accompanying notes are an integral part of these financial statements.
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
33
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements of the City of Saratoga, California, (the City) have been prepared in
conformity with generally accepted accounting principles (GAAP) as applied to governmental agencies.
The Governmental Accounting Standards Boards (GASB) is the accepted standard setting body for
establishing governmental accounting and financial reporting principles. The more significant of the
City's accounting policies are described below.
A. Financial Reporting Entity
The City was incorporated as a municipal corporation in 1956 under the general laws of the State of
California, and had a population of 31,997 at June 30, 2010. The City is a largely residential community
located in the foothills of the Santa Cruz Mountains.
The City operated under the Council-Manager form of government, with five-elected Council members
served by a full-time City Manager and staff. At June 30, 2010, the City's staff comprised 55 full-time
and ten part-time employees, and numerous recreation seasonal employees who were responsible for the
following City provided services:
Public Safety - The City provides round-the-clock police services under a contract with the County
Sheriff's offices. Emergency management and Fire services are provided by special district. Code
enforcement and inspection services are provided by one City employee.
Public Works/Maintenance - The City builds and maintains its parks, streets, curbs, gutters, and
related public property with a force of 22 employees. Major projects may be contracted out to
reduce costs.
Community Development - Zoning administration, plan checking and advance planning services are
provided by 12 employees.
Culture, Recreation and Community Support services are provided by a total of ten employees.
General Government services are provided by a total of 12 employees.
As required by GAAP, these basic financial statements present the City and its component units, entities
for which the City is considered to be financially accountable. The City Council acts as the governing
board. In addition, the City staff performs all administrative and accounting functions for these entities
and these entities provide their services entirely to the City. Blended component units, although legally
separate entities are, in substance, part of the City's operations and data from these units are combined
with data of the City. Discretely presented component units, on the other hand, are reported in a separate
column in the government-wide financial statements to emphasize their legal separateness from the City.
Each blended component unit has a June 30 year-end. The City had no discretely presented component
units.
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
34
The following entity is reported as blended component unit:
Lighting and Landscaping Assessment District - The Lighting and Landscaping Assessment District
(the District) was established in 1980, for the levy and the collection of assessments upon the several lots
or parcels of land in the District, and for the construction or installation of improvements, including
maintenance. The District is reported as a blended component unit of the City because it has the same
Governing Board as the City. The activity for the District has been included in the accompanying basic
financial statements and no separate financial statements are issued.
B. Basis of Accounting and Measurement Focus
The accounts of the City are organized on the basis of funds, each of which is considered a separate
accounting entity. The operations of each fund are accounted for with a separate set of self-balancing
accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as
appropriate. Governmental resources are allocated to and accounted for in individual funds based upon
the purposes for which they are to be spent and the means by which spending activities are controlled.
Government-Wide Financial Statements
The City's government-wide financial statements include a Statement of Net Assets and a Statement of
Activities and Changes in Net Assets. These statements present summaries of governmental activities for
the City. Fiduciary activities of the City are not included in these statements.
These statements are presented on an "economic resources" measurement focus and the accrual basis of
accounting. Accordingly, all of the City's assets and liabilities, including capital assets, as well as
infrastructure assets, and long-term liabilities, are included in the accompanying Statement of Net Assets.
The Statement of Activities presents changes in net assets. Under the accrual basis of accounting,
revenues are recognized in the period in which they are earned while expenses are recognized in the
period in which the liability is incurred.
Certain types of transactions are reported as program revenues for the City in three categories:
Charges for services
Operating grants and contributions
Capital grants and contributions
Certain eliminations have been made as prescribed by GASB Statement No. 34 in regards to interfund
activities, payables, and receivables. All internal balances in the Statement of Net Assets have been
eliminated. The following interfund activities have been eliminated:
Transfers in/Transfers out
Governmental Fund Financial Statements
Governmental fund financial statements include a Balance Sheet and a Statement of Revenues,
Expenditures and Changes in Fund Balances for all major governmental funds and non-major funds
aggregated. An accompanying schedule is presented to reconcile and explain the differences in net assets
as presented in these statements to the net assets presented in the government-wide financial statements.
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
35
The City has presented all major funds that met the applicable criteria. The following funds are major
funds:
General Fund
The General Fund is used to account for all of the general resources of the City not specifically levied or
collected for other City funds and the related expenditures. The General Fund accounts for all financial
resources of the City which are not accounted for in another fund.
Capital Improvement Capital Projects Fund
This fund accounts for resources used for the major capital acquisition and construction activities.
All governmental funds are accounted for on a spending or "current financial resources" measurement
focus and the modified accrual basis of accounting. Accordingly, only current assets and current
liabilities are included on the balance sheets. The Statement of Revenues, Expenditures and Changes in
Fund Balances present increases (revenues and other financing sources) and decreases (expenditures and
other financing uses) in net current assets.
Under the modified accrual basis of accounting, revenues are recognized in the accounting period in
which they become both measurable and available to finance expenditures of the current period.
Accordingly, revenues are recorded when received in cash, except that revenues subject to accrual (up to
60 days after year-end) are recognized when due. The primary revenue sources, which have been treated
as susceptible to accrual by the City, are property tax, sales tax, special assessments, intergovernmental
revenues, other taxes, interest revenue, rental revenue and certain charges for services. Fines, forfeitures,
licenses and permits and parking meter revenues are not susceptible to accrual because they are usually
not measurable until received in cash. Expenditures are recorded in the accounting period in which the
related fund liability is incurred.
Deferred revenues arise when potential revenues do not meet both the "measurable" and "available"
criteria for recognition in the current period. Deferred revenues also arise when the government receives
resources before it has a legal claim to them, as when grant monies are received prior to incurring
qualifying expenditures. In subsequent periods when both revenue recognition criteria are met or when
the government has a legal claim to the resources, the deferred revenue is removed from the combined
balance sheet and revenue is recognized.
Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is
provided to explain the differences created by the integrated approach of GASB Statement No. 34.
Proprietary Funds
The City’s internal service funds are proprietary funds. In the fund financial statements, proprietary funds
are presented using the accrual basis of accounting. Revenues are recognized when they are earned and
expenses are recognized when the related goods or services are delivered. In the fund financial
statements, proprietary funds are presented using the “economic resources measurement focus”. This
means all assets and liabilities (whether current or noncurrent) associated with their activities are included
on their balance sheets. Proprietary fund type operating statements present increases (revenues) and
decreases (expenses) in total net assets.
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
36
Proprietary fund operating revenues, such as charges for services, result from exchange transactions
associated with principal activity of the fund. Exchange transactions are those in which each party
receives and gives up essentially equal value. Non-operating revenues, such as subsidies, taxes, and
investment earnings result from nonexchange transactions or ancillary activities. Amounts paid to acquire
capital assets are capitalized as assets in the internal service funds financial statements.
Internal service funds account for charges to City departments for services provided, on a cost
reimbursement basis, in the following areas: general liability, workers’ compensation, office stores,
information technology services, vehicle maintenance, building maintenance, equipment replacement, and
information technology replacement.
Fiduciary Fund Financial Statements
Fiduciary fund financial statements include a Statement of Net Assets. The City's fiduciary funds
represent agency funds. Agency funds do not have a measurement focus, although they do have a basis of
accounting. An accrual basis of accounting is used to record the financial transactions. Agency funds are
custodial in nature (assets equal liabilities) and do not involve measurement of results of operations.
The activity reported in the City’s fiduciary fund is for the support of the Saratoga Community Access
Television, a non-profit organization responsible for operating the Public, Educational, and Government
Access channels for the community of Saratoga.
C. Cash, Cash Equivalents and Investments
The City pools its available cash for investment purposes. The City's cash and cash equivalents are
considered to be cash on hand, demand deposits, and short-term investments with original maturity of
three months or less from the date of acquisition. Cash and cash equivalents are combined with
investments and displayed as Cash and Investments.
Deposit and Investment Risk Disclosures - In accordance with GASB Statement No. 40, Deposit and
Investment Disclosures (Amendment of GASB Statement No. 3), certain disclosure requirements, if
applicable, for Deposits and Investment Risks in the following areas:
Interest Rate Risk
Credit Risk
o Overall
o Custodial Credit Risk
o Concentrations of Credit Risk
Foreign Currency Risk
Other disclosures are specified including use of certain methods to present deposits and investments,
highly sensitive investments, credit quality at year-end and other disclosures.
The City participates in an investment pool managed by the State of California titled Local Agency
Investment Fund (LAIF), which has invested a portion of the pool funds in Structured Notes and Asset
Backed Securities. LAIF's investments are subject to credit risk with the full faith and credit of the State
of California collateralizing these investments. In addition, these Structured Notes and Asset-Backed
Securities are subject to market risk as to change in interest rates.
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
37
D. Interfund Transactions
Interfund services provided and used are accounted for as revenue, expenditures or expenses, as
appropriate. Transactions that constitute reimbursements to a fund for expenditures/expenses initially
made from it that are properly applicable to another fund are recorded as expenditures/expenses in the
reimbursed fund. All other interfund transactions, except for interfund services provided and used and
reimbursements, are reported as transfers. Nonrecurring or nonroutine permanent transfers of equity are
reported as residual equity transfers. All other interfund transfers are reported as transfers.
E. Capital Assets
Capital assets, which include land, buildings, improvements, furniture, equipment and infrastructure
assets (e.g., roads, bridges, sidewalks, and similar items), were reported in the applicable governmental
activities in the government-wide financial statements. Capital assets were recorded at historical cost or
estimated historical cost if actual cost was not available. Donated assets were valued at their fair market
value on the date of donation. City policy has set the capitalization threshold for reporting capital assets
at $10,000. The City has chosen the Modified Approach for reporting the streets subsystem of
infrastructure capital assets.
Depreciation is recorded on a straight-line basis over the useful lives of the assets as follows:
Buildings and structures 40 Years
Machinery and equipment 5 to 10 Years
Infrastructure 15 to 50 Years
In June 1999, GASB issued Statement No. 34 Basic Financial Statements – and Management’s
Discussion and Analysis – for State and Local Governments which requires the inclusion of infrastructure
capital assets in local governments' basic financial statements. In accordance with Statement No. 34, the
City has included the value of all infrastructure in its basic financial statements.
The City defines infrastructure as the basic physical assets that allow the City to function, which includes
the street system, park and recreation lands and improvements system; storm water conveyance and
drainage system, buildings combined with site amenities such as parking and landscaping areas used by
the City in the conduct of its business. Each major infrastructure system can be divided into subsystems.
For example the street system can be subdivided into pavement, curb and gutters, sidewalks, medians,
streetlights, traffic control devices (signs, signals and pavement markings), landscaping and land. These
subsystems were not delineated in the basic financial statements. The appropriate operating department
maintains information regarding the subsystems. The City elected to use the Modified Approach as
defined by GASB Statement No. 34 for infrastructure reporting of its streets, concrete and asphalt
pavements. The City commissioned a physical assessment of the streets condition as of June 30, 2007.
This condition assessment is to be performed approximately every 3 years. The next condition
assessment is scheduled for September 2010. A Pavement Condition Index (PCI) was assigned to each
street segment. The index is expressed in a continuous scale from 0 to 100, where 0 is assigned to the
least acceptable physical condition and 100 is assigned to segments of street that have the physical
characteristics of a new street.
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
38
The following conditions were defined:
ConditionRating
Excellent80 - 100
Very Good70 - 79
Good50 - 69
Poor25 - 49
Very Poor0 - 24
The City's policy relative to maintaining the street assets is to achieve an average rating of 70 for all street
segments. This acceptable rating allows minor cracking and raveling of the pavement along with minor
roughness that could be noticeable to drivers traveling at the posted speeds. For all other infrastructure
systems, the City elected to use the Basic Approach as defined by GASB Statement No. 34 for
infrastructure reporting. The City commissioned an appraisal of City owned infrastructure and property
as of June 30, 2001, and will complete an internal update in January, 2011. This appraisal determined the
original cost, which is defined as the actual cost to acquire new property in accordance with market prices
at the time of first construction/acquisition. Original costs were developed in one of three ways: 1)
historical records; 2) standard unit costs appropriate for the construction/acquisition date; or 3) present
cost indexed by a reciprocal factor of the price increase from the construction/acquisition date to the
current date. The accumulated depreciation, defined as the total depreciation from the date of
construction/acquisition to the current date on a straight line, unrecovered cost method was computed
using industry accepted life expectancies for each infrastructure subsystem. The book value was then
computed by deducting the accumulated depreciation from the original cost.
F. Interest Payable
In the government-wide financial statements, interest payable of long-term debt is recognized as an
incurred liability for governmental fund types. The City has not allocated the interest on long-term debt
to departments.
In the fund financial statements, governmental fund types do not recognize the interest payable when the
liability is incurred. Interest on long-term debt is recorded in the fund statements when payment is made.
G. Claims Payable
The City records a liability to reflect an actuarial estimate of ultimate uninsured losses for both general
liability claims (including property damage claims) and workers' compensation claims. The estimated
liability for workers' compensation claims and general liability claims includes "incurred but not
reported" (IBNR) claims. There is no fixed payment schedule to pay these liabilities.
H. Compensated Absences
In the government-wide financial statements, compensated absences are recorded as incurred and the
related expenses and liabilities are reported.
In the fund financial statements, compensated absences are recorded as expenditures in the years paid, as
it is the City's policy to liquidate any unpaid compensated absences at June 30 from future resources,
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
39
rather than currently available financial resources. Only the amounts which become due at June 30 are
reported in the fund financials statements as a liability.
I. Long- Term Obligations
In the government-wide financial statements, long-term debt and other long-term obligations are reported
as liabilities in the applicable governmental activities. Bond premiums and discounts, as well as issuance
costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds
payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as
deferred charges and amortized over the term of the related debt.
In the fund financial statements, governmental fund types recognize bond premiums and discounts, as
well as bond issuance costs, during the current period. The face amount of debt issued is reported as
other financial sources. Premiums received on debt issuance are reported as other financing sources while
discounts on debt issuance reported as other financing uses. Issuance costs, whether or not withheld from
the actual debt proceeds received, are reported as debt service expenditures.
J. Fund Balances
In the fund financial statements, governmental funds report both reserved and unreserved fund balances.
Reserved fund balances are reservations of fund balances for amounts that are not available for
appropriation, or are legally restricted by outside parties for use for a specific purpose. Unreserved fund
balances are comprised of both designated and undesignated fund balances. Designations represent funds
identified by Council for an intended use, but are not legally obligated. Undesignated fund balance
represents funds available to offset budgetary shortfalls or provide for unanticipated uses during the year.
City Council has designated an amount for “Operations Reserve” to provide working capital cash flow.
This designation was established at $2,000,000 on July 1, 1999, to be increased annually by an amount
equal to the interest the City earned on an equivalent amount of cash and investments. As of June 30,
2010 this fund balance has grown to $2,889,077.
City Council has designated $1,500,000 for an “Economic Uncertainty” reserve. This amount provides
funding for emergency uses and economic downturns.
The Environmental Services reserve, collected from surcharges on garbage bills is designated specifically
for use as supplemental funding of Environmental Services program fees for household hazardous waste
fees, storm drain, street sweeping, and other pollution mitigation expenses related to integrated waste
programs and storm water management.
The Development Services reserve is designated supplemental funding for community development
services that includes zoning administration, inspection services, and development regulation programs
during periods where expenditures exceed revenues.
The Uncollected Deposits reserve is designated funding to offset development applicant deposits with
outstanding balances owed to the City.
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
40
The Carryforward reserve designation represents prior-year funding held over for one-time operational
activities that were not completed by year-end, or to carryforward prior-year funding for specific
activities as directed by Council.
The Grant Matching/Capital Improvement reserve designation represents funding set aside for use as the
matching funds required for grant based capital improvement projects.
The Hillside Stability reserve designation is funding for use as needed in hillside or landslide repairs or
mitigation projects.
K. Net Assets
In the government-wide financial statements, net assets are classified in the following categories:
Invested in Capital Assets, Net of Related Debt - This amount consists of capital assets net of
accumulated depreciation and reduced by outstanding debt that attributed to the acquisition,
construction, or improvement of the assets.
Restricted Net Assets - This amount is restricted by external creditors, grantors, contributors,
or laws or regulations of other governments.
Unrestricted Net Assets - This amount is all net assets that do not meet the definition of
"invested in capital assets, net of related debt" or "restricted net assets."
L. Use of Restricted/Unrestricted Net Assets
When an expense is incurred for purposes for which both restricted and unrestricted net assets are
available, the City's policy is to apply restricted net assets first.
M. Property Tax and Special Assessments
County tax assessments included secured and unsecured property taxes, and special assessments.
"Unsecured" refers to taxes on personal property. These tax assessments are secured by liens on the
property being taxed.
Revenue is recognized in the period for which the tax and assessment is levied. The County of Santa
Clara levies, bills and collects property taxes for the City, the County remits the entire amount levied and
handles all delinquencies, retaining interest and penalties. Secured and unsecured property taxes are
levied on January 1.
Secured property tax is due in two installments on November 1 and February 1, and becomes a lien on
those dates. It becomes delinquent on December 10 and April 10, respectively. Unsecured property tax is
due on July 1 and becomes delinquent on August 31.
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
41
N. Use of Estimates
The preparation of basic financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those estimates.
O. Subsequent Events
Management has considered subsequent events through November 8, 2010, the date which the financial
statements were available to be issued.
P. New GASB Pronouncements
GASB Statement No. 51 - In June 2008, GASB issued Statement No. 51, Accounting and Financial
Reporting for Intangible Assets. This Statement establishes accounting and financial reporting standards
for many different types of assets that may be considered intangible assets, including easements, water
rights, timber rights, patents, trademarks, and computer software. The City has no intangibles to which
the statement applies.
GASB Statement No. 53 - In June 2008, GASB issued Statement No. 53, Accounting and Financial
Reporting for Derivative Instruments. This Statement addresses the recognition, measurement, and
disclosure of information regarding derivative instruments entered into by State and local governments.
This Statement is not effective until June 30, 2010. The City has no derivative investments to which the
statement applies.
GASB Statement No. 54 - In March, 2009, GASB issued Statement No. 54, Fund Balance Reporting
and Governmental Fund Type Definition. The objective of this Statement is to enhance the usefulness of
fund balance information by providing clearer fund balance classifications that can be more consistently
applied and by clarifying the existing governmental fund type definitions. This Statement is not effective
until June 30, 2011. The City has determined this Statement change will have no effect on the financial
statements.
GASB Statement No. 55 - In March, 2009, GASB issued Statement No. 55, The Hierarchy of Generally
Accepted Accounting Principles for State and Local Governments. The objective of this Statement is to
incorporate the hierarchy of generally accepted accounting principles (GAAP) for state and local
governments into the Governmental Accounting Standard Board’s (GASB) authoritative literature. The
City has determined this Statement change did not have an effect on the financial statements.
GASB Statement No. 56 - In March, 2009, GASB issued Statement No. 56, Codification of Accounting
and Financial Reporting Guidance Contained in the AICPA Statement of Auditing Standards. The object
of this Statement is to incorporate into the Governmental Accounting Standard Board’s (GASB)
authoritative literature certain accounting and financial reporting guidance presented in the American
Institute of Certified Public Accounts’ Statement of Auditing Statements. The City has determined this
Statement change did not have an effect on the financial statements.
GASB Statement No. 57 – In December, 2009 GASB issued Statement No. 57, OPEB Measurement by
Agent Employers and Agent Multiple-Employer Plans.The objective of this Statement is to address
issues related to the use of the alternative measurement method and the frequency and timing of
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
42
measurements by employers that participate in agent multiple-employer benefit (OPEB) plans. The City
has determined this Statement will not have an effect on the financial statements.
GASB Statement No. 59 – In June 2010, GASB issued Statement No 59, Financial Instruments
Omnibus. The objective of this Statement is to update and improve existing standards regarding financial
reporting and disclosure requirements of certain financial instruments and external investment pools for
which significant issues have been indentified in practice. This pronouncement is effective for periods
beginning after June 15, 2010. The City does not believe there will be a significant financial statement
effect related to this Statement.
NOTE 2 - CASH AND INVESTMENTS
The City maintains a cash and investment pool, which includes cash balances and authorized investments
of all funds, which the City Treasurer invests to enhance interest earnings. The pooled interest earned is
allocated to the funds based on average month-end cash and investment balances in these funds. The City
has the following cash and investments at June 30, 2010:
Statement of Net Assets
GovernmentalFiduciary
ActivitiesFundTotal
Cash and investments15,864,455$ 91,364$ 15,955,819$
The City's Cash and Investments at June 30, 2010, in more detail:
Cash and cash equivalents:
Petty cash 1,300$
Demand deposits 201,598
Total Cash and Cash Equivalents202,898
Investments:
Local Agency Investment Fund (LAIF)15,752,921
Total Cash and Investments15,955,819$
A. Cash Deposits
The carrying amounts of the City's cash deposits were $201,598 at June 30, 2010. Bank balances before
reconciling items were $710,867 at that date due to deposits in transit and outstanding checks. The total
amount was collateralized or insured with securities held by the pledging financial institutions.
The California Government Code requires California banks and savings and loan associations to secure
the City's cash deposits by pledging securities as collateral. This Code states that collateral pledged in
this manner shall have the effect of perfecting a security interest, and places the City ahead of general
creditors of the institution.
The market value of pledged securities must equal at least 110 percent of the City's cash deposits.
California law also allows institutions to secure City deposits by pledging first trust deed mortgage notes
that have a value of 150 percent of the City's total cash deposits. The City has waived the collateral
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
43
requirements for cash deposits which are fully insured to $250,000 by the Federal Deposit Insurance
Corporation (FDIC). Demand deposits (non-interest bearing checking accounts) have unlimited insurance
through the TAG Program. Other accounts are insured up to $250,000 per custodian within agency.
The City follows the practice of pooling cash and investments of all funds, except for funds required to be
held by fiscal agents under the provisions of bond indentures. Interest income from cash and investments
with fiscal agents is credited directly to the related fund.
B. Investments
Under the provisions of the City's investment policy, and in accordance with California Government
Code, the following investments are authorized:
Securities of the U.S. Government or its agencies.
Certificates of Deposit (or Time Deposits) placed with commercial banks and/or savings
and loan companies.
Negotiable Certificates of Deposit.
California Local Agency Investment Fund.
Investment-grade obligations of State, local governments or public authorities.
Money market mutual funds.
Passbook savings account and demand deposits.
The City is in compliance with GASB Statement No. 31, Accounting and Financial Reporting for Certain
Investments and for External Investments Pools which requires the City's investments be recorded at fair
value instead of cost. Under GASB 31, the carrying value of investments are adjusted to reflect their fair
value at each fiscal year-end, with the effects of these adjustments included in the carrying value of the
investments.
C. External Investment Pool
The City's investments with LAIF at June 30, 2010, include a portion of the pool funds invested in
Structured Notes and Asset-Backed Securities. These investments include the following:
Structured Notes - debt securities (other than asset-backed securities) whose cash flow
characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or
more indices and/or that have embedded forwards or options.
Asset-Backed Securities - the bulk of which are mortgage-backed securities, entitle their
purchasers to receive a share of the cash flows from a pool of assets such as principal and
interest repayments from a pool of mortgages (such as CMO's) or credit card receivables.
LAIF is overseen by the Local Agency Investment Advisory Board, which consists of five members, in
accordance with State statute.
As of June 30, 2010, the City had $15,752,921 invested in LAIF which had invested 14.71 percent of the
pool investment funds in Structured Notes and Asset-Backed Securities. The LAIF fair value factor of
1.001643776 was used to calculate the fair value of the investments in LAIF.
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
44
D. Risk Disclosures
Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an
investment. Generally, the longer the term of an investment’s maturity, the greater the sensitivity to
changes in market interest rates. Although the City’s investment policy allows for a broad range of
investment instruments with varying terms of maturity, investments are limited to the Local Agency
Investment Fund (LAIF) which is managed by the State Treasurer Office and overseen by the Pooled
Money Investment Board, the State Treasurer investment committee, and a Local Agency Advisory
Board.
Included in LAIF’s investment portfolio are U.S. Treasuries, Federal Agency obligations, time deposits,
negotiable certificates of deposits, commercial paper, corporate bonds, and security loans. Funds are
available for withdrawal on demand, and are recorded on an amortized cost basis. At June 30, 2010, these
investments had a weighted average maturity of 203 days. The City had the following invested in LAIF:
Investment
Maturities in Years
FairLess Than
ValueOne Year
State of California - Local Agency Investment Fund (LAIF)15,752,921$ 15,752,921$
Credit Risk
As of June 30, 2010, the City's investments in external investment pools are unrated. The City only
invests in LAIF, therefore has no other policy relating to the credit risk of investments.
Custodial Credit Risk
For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the
City will not be able to recover the value of its investments or collateral securities that are in the
possession of an outside party. The City did not hold any securities held by an investment counterparty at
the year ended June 30, 2010.
NOTE 3 - LOANS RECEIVABLE
The City had the following loans receivable as of June 30, 2010:
DueDue
BalanceBalanceWithinMore Than
July 1, 2009AdditionsDeletionsJune 30, 2010One YearOne Year
Housing Rehabilitation
Loan Program85,003$ -$ (13,333)$ 71,670$ 13,333$ 58,337$
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
45
The City administers a housing rehabilitation program called the Saratoga Housing Assistance and
Rehabilitation Program (SHARP) using Housing and Community Development Act funds. Under the
SHARP program, individuals with incomes below a certain level and corporations building rental housing
for low and-moderate income tenants are eligible to receive low interest loans, secured by deeds of trust,
for construction work on their properties. Federal funds received by the City are deposited with a
commercial bank. Upon approval of loans, the bank disburses the funds, arranges for and collects
repayments.
In the Governmental Fund Financial Statements, these loans have been offset by deferred revenue as they
are not expected to be repaid immediately. In the Government-Wide Financial Statements, the amount of
deferred revenue was recognized as revenue.
NOTE 4 – PROPERTY TAXES: PROPOSITION 1A STATE BORROWING
Under the provision of Proposition 1A and as part of the 2009/10 budget package passed by the California
state legislature on July 28, 2009, the State of California borrowed 8% of the amount of property tax
revenue, including those property taxes associated with the in-lieu motor vehicle license fee, the triple flip
in lieu sales tax, and supplemental property tax, apportioned to cities, counties, and special districts
(excluding redevelopment agencies). The state is required to repay this borrowing plus interest by June
30, 2103. After repayment of this initial borrowing, the California legislature may consider only one
additional borrowing within a ten-year period. The amount of this borrowing pertaining to the City of
Saratoga was $674,777.
Authorized with the 2009/10 State budget package, the Proposition 1A Securitization Program was
instituted by the California Statewide Communities Development Authority (“California Communities”),
a joint power authority sponsored by the California State Association of Counties and the League of
California Cities, to enable local governments to sell their Proposition 1A receivables to California
Communities. Under the Securitization Program, California Communities simultaneously purchased the
Proposition 1A receivables and issued bonds (“Prop 1A Bonds”) to provide local agencies with cash
proceeds in two equal installments, on January 15, 2010 and May 3, 2010. The purchase price paid to the
local agencies equal 100% of the amount of the property tax reduction. All transaction costs of issuance
and interest were paid by the State of California. Participating local agencies have no obligation on the
bonds and no credit exposure to the State. The City participated in the securitization program and
accordingly property taxes have been recorded in the same manner as if the State had not exercised its
right under Proposition 1A. The receivable sale proceeds were equal to the book value and, as a result, no
gain or loss was recorded.
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
46
NOTE 5 - FUND FINANCIAL STATEMENTS INTERFUND TRANSACTIONS
Transfers In/Out
Transfers for the year ended June 30, 2010 were as follows:
Transfer inTransfer outAmount
General FundCommunity Development Block Grant42,859$
Capital Improvement Fund232,983
IT Equipment Replacement Fund50,000
325,842
Capital Improvement FundGeneral Fund650,000
Community Development Block Grant90,574
IT Equipment Replacement Fund105,000
Library Capital Improvement Fund405
845,979
Total 1,171,821$
Of the transfers, $650,000 was transferred from the General Fund, $90,574 from the Community
Development Block Grant Fund, $105,000 from the IT Equipment Replacement Fund, and $405 from the
Library Capital Improvement Fund to fund various projects in the Capital Improvement Plan. A transfer
of $106,000 from the Capital Improvement Fund went to the General Fund to reimburse administration
and engineering staff services for the Gas Tax funded street program. Additionally, $126,983 was
transferred from the Capital Improvement Fund back to the General Fund upon the closeout of two
projects. A transfer from the Community Development Block Grant Fund to the General Fund was
reimbursement for grants and administrative costs, and the IT Equipment Replacement Fund transferred
$50,000 to the General Fund for budget relief.
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
47
NOTE 6 - CAPITAL ASSETS
Capital assets activity for the year ended June 30, 2010, consisted of the following:
Primary Government
BalanceBalance
July 1, 2009AdditionsRetirementsReclassificationsJune 30, 2010
Governmental activities:
Capital assets, not being depreciated:
Land and land improvements10,585,106$ -$ -$ 2,398,972$ 12,984,078$
Construction in progress6,595,346 1,808,376 (57,958) (3,902,404) 4,443,360
Infrastructure:
Street pavement system48,570,458 - - 585,161 49,155,619
Total capital assets, not being depreciated65,750,910 1,808,376 (57,958) (918,271) 66,583,057
Capital assets, being depreciated:
Buildings and structures23,156,758 - - 256,005 23,412,763
Machinery and equipment- -
Governmental funds1,324,426 - (127,790) 371,149 1,567,785
Internal service funds701,714 12,345 - - 714,059
Infrastructure:- -
Bridges1,563,654 - - - 1,563,654
Signs and lights1,820,585 - - - 1,820,585
Drainage system39,912,821 - - - 39,912,821
Sidewalks11,681,711 - - 291,117 11,972,828
Total capital assets, being depreciated80,161,669 12,345 (127,790) 918,271 80,964,495
Accumulated depreciation:
Buildings and structures(4,894,979) (576,134) - - (5,471,113)
Machinery and equipment
Governmental funds(1,274,551) (32,197) 127,790 - (1,178,958)
Internal service funds(280,943) (141,577) - - (422,520)
Infrastructure:
Bridges(945,168) (28,034) - - (973,202)
Signs and lights(723,540) (68,565) - - (792,105)
Drainage system(11,531,047) (798,256) - - (12,329,303)
Sidewalks(4,159,835) (299,652) - - (4,459,487)
Total accumulated depreciation(23,810,063) (1,944,415) 127,790 - (25,626,688)
Total capital assets, being depreciated, net56,351,606 (1,932,070) - 918,271 55,337,807
Governmental activities capital assets, net 122,102,516$ (123,694)$ (57,958)$ -$ 121,920,864$
Depreciation expense, including the amount related to the internal service funds,
was charged in the following functions in the Statement of Activities:
General Government1,182,170$
Public Works606,544
Community Services13,577
Community Development547
Internal Service Funds141,577
Total Depreciation Expense1,944,415$
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
48
In accordance with GASB Statement No. 34, the City has reported all capital assets including
infrastructure in the Government-Wide Statement of Net Assets. The City elected to use the "Modified
Approach" as defined by GASB Statement No. 34 for infrastructure reporting for its pavement system.
As a result, no accumulated depreciation or depreciation expense has been recorded for this system. A
more detailed discussion of the "Modified Approach" is presented in the Required Supplementary
Information section of this report. All other capital assets including other infrastructure systems were
reported using the Basic Approach whereby accumulated depreciation and depreciation expense have
been recorded.
NOTE 7 – LONG-TERM OBLIGATIONS
A summary of the City's long-term obligations transactions for the year ended June 30, 2010, is presented
below:
Classification
BalanceBalanceDue WithinDue In More
DescriptionJuly 1, 2009AdditionsRetirementsJune 30, 2010One YearThan One Year
General Obligation Bonds:
2001 Library Bonds13,285,000$ -$ (330,000)$ 12,955,000$ 350,000$ 12,605,000$
Compensated absences584,415 531,322 (422,069) 693,668 391,822 301,846
Total13,869,415$ 531,322$ (752,069)$ 13,648,668$ 741,822$ 12,906,846$
General Obligation 2001 Library Bonds - Original Issue $15,000,000
On May 1, 2001, the City issued General Obligation Bonds Series 2001 in the amount of $15,000,000.
The proceeds of the bonds were used to improve, renovate, and expand the Saratoga Community Library.
The bonds are payable from and secured by certain property taxes within the City. Interest on the bonds
ranges from 5 percent to 6 percent and is payable on February 1 and August 1 of each year, commencing
February 1, 2002. Principal is due annually beginning on August 1, 2002, in amounts ranging from
$60,000 to $940,000. The bonds mature on August 1, 2031, and are subject to redemption prior to
maturity. The bonds may be called for redemption at the option of the City at redemption prices from
101 percent beginning on or after August 1, 2010 and 100 percent of par on or after August 1, 2011. At
June 30, 2010, the outstanding balance of the bonds was $12,955,000.
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
49
The annual debt service requirements on these bonds are as follows:
Year EndedPrincipalInterestTotal
2011350,000$ 663,156$ 1,013,156$
2012370,000 641,556 1,011,556
2013395,000 620,581 1,015,581
2014415,000 600,331 1,015,331
2015435,000 579,081 1,014,081
2016-20202,350,000 2,555,031 4,905,031
2021-20252,970,000 1,887,966 4,857,966
2026-20303,840,000 1,005,113 4,845,113
2031-20321,830,000 97,388 1,927,388
Total12,955,000$ 8,650,203$ 21,605,203$
Compensated Absences
The City's liability for vested and unpaid compensated absences (accrued vacation and sick pay) has been
accrued and amounts to $693,668 at June 30, 2010. The compensated absences liability will generally be
liquidated through the General Fund.
NOTE 8 - RISK MANAGEMENT
The City participates in the following public entity risk pools:
ABAG Plan Corporation (ABAG PLAN) covers general liability claims up to a limit of $5 million and
purchases an additional $15 million of excess insurance coverage, for a total of $20 million per
occurrence limit. The City has a deductible or uninsured liability of up to $25,000 per claim. Once the
City's deductible is met, ABAG PLAN becomes responsible for payment of all claims up to the limit.
During the fiscal year ended June 30, 2010, the City contributed $184,614 for current year coverage and
received no refund of prior year excess contributions.
The ABAG Workers' Compensation Pool Insurance Authority (ABAG POOL) covers workers'
compensation coverage up to $250,000 and excess coverage provides an employer liability limit of $5
million per occurrence, and workers’ compensation per occurrence limit to $100 million. The City has no
deductible for these claims. During the fiscal year ended June 30, 2010, the City contributed $182,575
for current year coverage.
The City's contribution equals the ratio of the City's payroll to the total payrolls of all entities
participating in the same layer of each program, in each program year.
Actual surpluses or losses are shared according to a formula developed from overall loss costs and spread
to member entities on a percentage basis after a retrospective rating.
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
50
There have been no significant reductions of insurance settlements that exceeded insurance coverage for
the past three years.
The workers’ compensation and general liability claims payable of $54,601 reported at June 30, 2010, are
based on the requirements of GASB Statement No. 10, which requires that a liability for claims be
reported if information prior to the issuance of the basic financial statements indicates that it is probable
that a liability has been incurred at the date of the basic financial statements and the amount of the loss
can be reasonably estimated. Changes in the claims payable amounts were as follows:
Year EndedYear Ended
June 30, 2010June 30, 2009
Claims payable, beginning of year83,216$ 59,908$
Fiscal year claims and changes in estimates49,735 54,366
Claims payments(78,350) (31,058)
Claims payable, end of year54,601$ 83,216$
The General Fund has been used in the prior years to liquidate the liability for claims and judgments.
Each risk pool is governed by a board consisting of representatives from member municipalities. The
board controls the operations of each risk pool, including selection of management and approval of
operating budgets, independent of any influence by member municipalities beyond their representation on
the Board.
The following represents summary audited financial information of ABAG Plan Corporation and the
ABAG Workers’ Compensation Pool Insurance Authority for the fiscal year ended June 30, 2009 (most
recent available):
PlanComp Shared
CorporationRisk Pool
Total Assets48,715,107$ 3,431,189$
Total Liabilities17,360,134 580,976
Net Assets31,354,973$ 2,850,213$
Total Revenues11,211,127$ 667,365$
Total Expenses7,218,603 482,364
Net Increase in Net Assets3,992,524$ 185,001$
Audited financial information for each risk pool may be obtained from ABAG at P.O. Box 2089,
Oakland, California 94604-2089.
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
51
NOTE 9 - RETIREMENT PLANS
Pension Plan
Plan Description - The City contributes to the California Public Employees' Retirement System
(CalPERS), a cost-sharing multiple-employer defined benefit plan. CalPERS provide retirement and
disability benefits, annual cost-of-living adjustments, and death benefits to plan members and
beneficiaries. CalPERS act as a common investment and administrative agent for participating public
entities within the State of California. Benefit provisions and all other requirements are established by
State statute and City ordinance. Copies of CalPERS' annual financial report may be obtained from their
Executive Office located at 400 P Street, Sacramento, California 95811.
Funding Policy – The City employer is required to contribute an actuarially determined rate of annual
covered payroll for its miscellaneous employees (11.652 percent for FY 2009/10). Active plan members
are required by State statute to contribute 7 percent (7%) of their annual covered salary. The City
employer contributes this required amount on behalf of City employees, which amounted to $339,339 for
the year ended June 30, 2010.
Annual Pension Cost - For fiscal year 2009/10, the City's annual pension cost was $564,855. The
required contribution was determined as part of the June 30, 2007, actuarial valuation using the entry age
normal actuarial cost method. The actuarial assumptions included (a) 7.75 percent (7.75%) investment
rate of return (net of administrative expenses), (b) projected annual salary increases ranging from 3.25
percent to 14.45 percent for miscellaneous employees depending on age, service, and type of
employment, and (c) 3.25 percent per year payroll growth adjustments. Both (a) and (b) included an
inflation component of 3.00 percent. The actuarial value of CalPERS assets was determined using
techniques that smooth the effects of short-term volatility in the market value of investments over a three-
year period. CalPERS unfunded actuarial accrued liability (or surplus) is amortized as a level percentage
of projected payroll on a closed basis. The amortization period at June 30, 2007, was 20 years for
miscellaneous employees for prior and current service unfunded liability.
THREE-YEAR ANNUAL PENSION COSTS TREND INFORMATION FOR CALPERS
AnnualNet
FiscalPension CostAPCPension
Year(APC)ContributedObligation
2008538,526$ 100%-$
2009559,971 100%-
2010564,855 100%-
Required Supplementary Information
In 2004, CalPERS established a risk pool for cities and other government entities that have less than 100
active members. Actuarial valuations are performed with other participants within the same risk pool.
Stand alone information of the Schedule of the Funding Progress for the City is no longer available;
therefore, the following information is the CalPERS Risk Pool Information for all entities within the pool
(latest available information):
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
52
Entry AgeUnfundedUAAL
NormalActuarialLiability (UAAL)Annualas a
ValuationAccruedValue(ExcessFundedCoveredPercentage
DateLiabilityof AssetsAssets)StatusPayrollof Payroll
6/30/20062,754,396,608$ 2,492,226,176$ 262,170,432$ 90.5%699,897,835$ 37.5%
6/30/20072,611,746,790 2,391,434,447 220,312,343 91.6%655,522,859 33.6%
6/30/20082,780,280,768 2,547,323,278 232,957,490 91.6%688,606,681 33.8%
NOTE 10 - NET ASSETS / FUND BALANCES
A. Investment in Capital Assets, Net of Related Debt
As of June 30, 2010, the investment in capital assets, net of related debt consisted of the following:
Capital Assets, Net121,920,864$
2001 General Obligation Library Bonds(12,955,000)
Investment in Capital Assets, Net of Related Debt108,965,864$
B. Restricted Net Assets
As of June 30, 2010, the restricted net assets consisted of the following:
CapitalDebtSpecial
ProjectsServiceProjectsTotal
Restricted Net Assets4,057,300$ 892,593$ 569,132$ 5,519,025$
Restricted For
NOTE 11 - JOINT POWERS AGREEMENTS
The City is a member of the Santa Clara County Traffic Authority (Traffic Authority), which consists of
various cities in the San Francisco Bay area.
The Traffic Authority was formed in 1985, by a joint exercise of powers agreement between the County
of Santa Clara and the cities of Santa Clara County for the purpose of financing highway capital
improvements within the County to serve transportation needs. Financial statements may be obtained
from the Traffic Authority at 1754 Technology Drive, Suite 224, San Jose, California 95110.
The City is also a member of other Joint Powers Authorities (JPA) but has had no material transactions
with them. These JPA's are governed by boards consisting of representatives from their members. The
boards control the operations of each JPA, including selection of management and approval of operating
budgets, independent of any influence by its members beyond their representation on the board.
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
53
NOTE 12 - EXCESS EXPENDITURES OVER APPROPRIATIONS
There were no excess of expenditures over appropriations in individual funds during fiscal year 2009/10.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
A. Lawsuits
The City is presently involved in certain matters of litigation that have arisen in the normal course of
conducting City business. City management believes, based upon consultation with the City Attorney,
that these cases, in the aggregate, are not expected to result in a material adverse financial impact on the
City. Additionally, City management believes that the City's insurance programs are sufficient to cover
any potential losses should an unfavorable outcome materialize.
B. Federal and State Grant Programs
The City participates in Federal and State grant programs. These programs are audited by the City's
independent accountants in accordance with the provisions of the Federal Single Audit Act Amendments
of 1996 and applicable State requirements. For Federal programs, the City reached the level of qualifying
cost during the current fiscal year so a single audit was required. Expenditures which may be disallowed,
if any, by the granting agencies, cannot be determined at this time. The City expects such amounts, if
any, to be immaterial.
CITY OF SARATOGA
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
54
C. Commitments
The City had several outstanding contracts or planned construction projects as of June 30, 2010. These
projects are evidenced by contractual commitments with contractors and include:
OriginalCommitment
VendorcommitmentRemaining
Fehr & Peers40,000$ 29,846$
Cotton Shires & Associates1,011 1,011
O' Grady Paving751,768 497,156
Labor Consultants7,000 7,000
BFK Engineers498,238 426,363
David Gates & Associates14,092 3,677
Testing Engineers8,087 8,087
Metropolitan Planning Group8,540 500
Maggiora Brothers Drilling47,075 13,548
Steve Benzing Architect5,250 2,647
Mark Thomas & Company56,809 35,814
Guerra Construction70,653 5,475
Hakone Foundation - New Visitor Center250,000 250,000
1,758,523$ 1,281,124$
As of June 30, 2010, in the opinion of City management, there were no additional outstanding matters
that would have a significant effect on the financial position of the funds of the City.
REQUIRED SUPPLEMENTARY INFORMATION
CITY OF SARATOGA
REQUIRED SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED JUNE 30, 2010
57
NOTE 1 - BUDGETARY INFORMATION
Through the budget, the City Council sets the direction of the City, allocates its resources and establishes
its priorities. The Annual Operating and Capital Budgets assure the efficient and effective uses of the
City's economic resources, as well as establishing that the highest priority objectives are accomplished.
The annual budgets are adopted for the period of July 1 to June 30, and prepared to accurately and openly
communicate service and infrastructure priorities to the community, businesses, vendors, employees, and
other public agencies. The Annual Operating Budget is developed on a program basis for all funds with
fund level authority. It establishes the foundation of effective financial planning by providing resource
planning, performance measures and controls that permit the evaluation and adjustment of the City's
performance. The City adopts an annual budget for the capital projects as part of adopting the five-year
Capital Improvement Plan. The annual capital budget is adopted on a project-by-project basis.
The City follows these procedures in establishing the budgetary data reflected in the basic financial
statements:
a.The City Manager submits to the City Council a proposed operating budget for the fiscal year
commencing the following July 1. The operating and capital budgets include proposed
expenditures and the means of financing them.
b.Public hearings are conducted to obtain taxpayer comments.
c.The budgets are legally enacted through the passage of a resolution.
d.For the Operating Budget, the City Manager may authorize transfers of budget amounts within a
fund. However, any revisions that increase the total budgeted expenditures of any fund must be
approved by the City Council. Expenditures may not legally exceed budgeted appropriations at
the fund level without City Council approval.
e.As Capital Projects are adopted on a project basis, the City Council must approve increases or
decreases of budgeted amounts or changes in project scope. Upon project completion, immaterial
amounts are transferred to ongoing maintenance projects within the capital program. If remaining
project funds are material, the project balance is brought back to Council for approval to transfer.
f.Formal budgetary integration in the form of legally adopted budgets is employed as a
management control device for all funds. Budgets are adopted on a basis consistent with
generally accepted accounting principles. Budgeted expenditures reported are as amended by
supplemental appropriations of the City Council.
Encumbrance accounting, under which purchase orders, contracts, and other commitments for the
expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is
employed as an extension of formal budgetary integration in the General, Special Revenue, Internal
Service, and Capital funds. Unexpended and unencumbered appropriations automatically lapse at the end
of the fiscal year.
CITY OF SARATOGA
REQUIRED SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED JUNE 30, 2010
58
The following is the budget comparison schedules for General Fund.
Variance with
Final Budget
Budgeted AmountsActualPositive
OriginalFinalAmounts(Negative)
REVENUES:
Property taxes8,169,500$ 8,169,500$ 8,185,390$ 15,890$
Special assessments6,000 6,000 8,974 2,974
Sales taxes935,000 910,000 954,574 44,574
Other local taxes655,000 630,000 560,040 (69,960)
Licenses & permits1,271,400 1,031,400 1,063,946 32,546
Fines & forfeitures285,000 285,000 350,751 65,751
Intergovermental - state285,000 245,000 323,837 78,837
Intergovermental - other23,500 23,500 34,050 10,550
Franchise fees1,675,000 1,675,000 1,663,657 (11,343)
Use of money & property684,342 534,342 541,305 6,963
Other revenue1,756,881 1,606,881 1,558,525 (48,356)
Total revenues 15,746,623 15,116,623 15,245,049 128,426
EXPENDITURES:
Current:
General and intergovernmental services3,495,806 3,276,989 3,102,397 174,592
Public safety4,345,915 4,345,234 4,348,778 (3,544)
Public works 4,511,348 4,324,168 4,353,903 (29,735)
Community services1,277,906 1,248,694 1,222,649 26,045
Community development services2,185,603 2,143,460 2,111,172 32,288
Total expenditures 15,816,578 15,338,545 15,138,899 199,646
REVENUES OVER
(UNDER) EXPENDITURES (69,955) (221,922) 106,150 328,072
OTHER FINANCING SOURCES (USES):
Transfers in153,732 325,842 325,842 -
Transfers out(253,500) (650,000) (650,000) -
Total other financing sources (uses)(99,768) (324,158) (324,158) -
Net change in fund balances (169,723)$ (546,080)$ (218,008) 328,072$
FUND BALANCES:
Beginning of year8,228,686
End of year 8,010,678$
CITY OF SARATOGA
REQUIRED SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED JUNE 30, 2010
59
NOTE 2 - MODIFIED APPROACH FOR CITY STREETS INFRASTRUCTURE CAPITAL
ASSETS
In accordance with GASB Statement No. 34, the City is required to account for and report infrastructure
capital assets. The City defines infrastructure as the basic physical assets that allow the City to function
and those resources utilized primarily by the public which provide future economic benefits for a
minimum of two years. Infrastructure can be defined as assets that are immovable and of value only to
the government. Major infrastructure includes the street system, park and recreation lands and
improvements; storm water conveyance and drainage systems, and buildings combined with site
amenities such as parking and landscaping areas used by the City in the conduct of its business. Each
major infrastructure system can be divided into subsystems. For example, the street system can be
divided into concrete and asphalt pavements, concrete curb and gutters, sidewalks, medians, streetlights,
traffic control devices (signs, signals and pavement markings), landscaping and land. Subsystem detail is
not presented in these basic financial statements; however, the City maintains detailed information on
these subsystems.
The City has elected to use the "Modified Approach" as defined by GASB Statement No. 34 for
infrastructure reporting for its Streets Pavement System. Under GASB Statement No. 34, eligible
infrastructure capital assets are not required to be depreciated under the following requirements:
The City manages the eligible infrastructure capital assets using an asset management system
with characteristics of (1) an up-to-date inventory; (2) perform condition assessments and
summarize the results using a measurement scale; and (3) estimate annual amount to maintain
and preserve at the established condition assessment level.
The City documents that the eligible infrastructure capital assets are being preserved
approximately at or above the established and disclosed condition assessment level.
The City commissioned a physical assessment of the streets conditions as of June 30, 2007. The study
assists the City by providing current inspection data used to evaluate current pavement condition. This
helps to maintain a City-defined desirable level of pavement performance while optimizing the
expenditure of limited fiscal resources. The entire pavement network within the City is composed of
approximately 140 centerline miles of paved surfaces. The City’s road system can be grouped by
function class and includes 23.4 centerline miles of arterial, 23.3 centerline miles of collector, and 93.3
miles as residential.
A visual survey of all pavement segments was conducted to assess the existing surface condition of each
of the individual pavement segments. Upon completion of the study, a Pavement Condition Index (PCI)
was calculated for each segment in the City's pavement network to reflect the overall pavement condition.
Rating between 0 and 100, a PCI of 0 would correspond to a badly deteriorated pavement with virtually
no remaining life. A PCI of 100 would correspond to a pavement with proper engineering design and
construction at the beginning of its life cycle. The next assessment study is contracted for September,
2010.
CITY OF SARATOGA
REQUIRED SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED JUNE 30, 2010
60
The following conditions were defined:
ConditionRating
Excellent80 - 100
Very Good70 - 79
Good50 - 69
Poor25 - 49
Very Poor0 - 24
The City's policy is to achieve an average rating of 70 for all streets, which is a very good rating. This
rating allows minor cracking and raveling of the pavement along with minor roughness that could be
noticeable to drivers traveling at the posted speeds. As of June 30, 2010, the City's street system was
rated at a PCI index of 70 on the average with the detail condition as follows:
Percent of
ConditionStreets
Excellent to Good86%
Poor13%
Very Poor1%
The City expended $771,386 on street maintenance for the year ended June 30, 2010. These routine
maintenance expenditures delayed deterioration. The budget required to maintain and improve the
current level of overall condition through the year 2011 is a minimum of $6,000,000. (Approximately
$2,000,000 projected budget each year for the years ending June 30, 2010 and 2011.)
A schedule of estimated annual amount calculated to maintain and preserve its streets at the current level
compared to actual expenditures for street maintenance for the last nine years is presented below:
Funded By
FiscalActualOtherGas TaxTotalPCI
YearBudgetExpendituresSourcesFundFundedIndex
2000-012,520,255$ 801,160$ 205,309$ 595,851$ 801,160$ -
2001-023,529,420 2,214,717 1,631,855 582,862 2,214,717 -
2002-032,207,922 1,553,674 974,514 579,160 1,553,674 -
2003-041,961,844 1,489,667 907,327 582,340 1,489,667 70
2004-051,800,000 2,609,648 1,478,216 1,131,432 2,609,648 70
2005-061,156,547 1,030,382 353,652 676,730 1,030,382 70
2006-072,026,404 1,156,889 19,899 970,818 990,717 70
2007-082,246,152 1,691,466 1,252,709 438,757 1,691,466 70
2008-092,680,504 1,574,485 1,148,650 425,835 1,574,485 70
2009-101,811,130 771,386 575,710 195,676 771,386 70
As of June 2010, approximately 40 percent of the City's streets were rated below the average standard of
70. The City will continue to rehabilitate these segments of the streets. Total deficiencies (deferred
maintenance) identified in the Pavement Management System Report at the end of a five-year period
(2007-2011) amounted to approximately $11,600,000 for all streets and are expected to be rehabilitated
with a minimum annual budget of $1,000,000.
SUPPLEMENTARY INFORMATION
61
NONMAJOR GOVERNMENTAL FUNDS
Special Revenue Funds
Lighting and Landscape Assessment District Funds – This combined fund accounts for revenues and
expenditures associated with maintaining the 24 Landscape and Lighting districts throughout the city
which were approved by consent of property owners living along or within the boundaries of the Districts.
Community Development Block Grant - This fund accounts for grant funds received from the Federal
Government for the purpose of assisting programs and building infrastructure for the development of
viable urban communities and for the City's rehabilitation loan program.
Debt Service Fund
Library Bond - Santa Clara County general obligation bond tax revenues are accumulated in this fund to
pay annual principal and interest payments on the voter approved 2001 Library Improvement Bond.
Capital Projects Funds
Library Expansion - This fund accounts for the remaining resources approved for use in the remodel and
expansion of the City's library.
CITY OF SARATOGA
COMBINING BALANCE SHEETS
NONMAJOR GOVERNMENTAL FUNDS
JUNE 30, 2010
62
Debt Service
Lighting andCommunity
LandscapingDevelopment
AssessmentBlockLibrary
DistrictGrantBond
ASSETS
Cash and investments459,919$ 128,550$ 890,341$
Receivables:
Accounts442 9,621 1,414
Interest536 192 838
Loans- 71,670 -
Total assets 460,897$ 210,033$ 892,593$
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable20,507$ -$ -$
Deferred revenue- 81,291 -
Total liabilities 20,507 81,291 -
Fund Balances:
Reserved for:
Debt service- - 892,593
Unreserved, undesignated, reported in:
Special revenue funds440,390 128,742 -
Capital projects funds- - -
Total fund balances 440,390 128,742 892,593
Total liabilities and fund balances 460,897$ 210,033$ 892,593$
The accompanying notes are an integral part of these financial statements
Special Revenue
63
Capital
Projects
Total
Other
LibraryGovernmental
ExpansionFunds
352,141$ 1,830,951$
- 11,477
570 2,136
- 71,670
352,711$ 1,916,234$
1,352$ 21,859$
- 81,291
1,352 103,150
- 892,593
- 569,132
351,359 351,359
351,359 1,813,084
352,711$ 1,916,234$
CITY OF SARATOGA
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2010
64
Debt Service
Lighting andCommunity
LandscapingDevelopment
AssessmentBlockLibrary
DistrictGrantBond
REVENUES:
Property taxes186,006$ -$ -$
Special assessment266,609 - 971,197
Intergovernmental - Other- 123,812 -
Use of money and property3,388 858 5,311
Other revenue90 13,333 -
Total revenues 456,093 138,003 976,508
EXPENDITURES:
Current:
Public works 375,619 - -
Capital outlay- - -
Debt service:
Principal- - 330,000
Interest and fiscal charges- - 685,276
Total expenditures 375,619 - 1,015,276
REVENUES OVER
(UNDER) EXPENDITURES 80,474 138,003 (38,768)
OTHER FINANCING (USES):
Transfers out- (133,433) -
Total other financing sources (uses)- (133,433) -
Net change in fund balances 80,474 4,570 (38,768)
FUND BALANCES:
Beginning of year359,916 124,172 931,361
End of year 440,390$ 128,742$ 892,593$
The accompanying notes are an integral part of these financial statements
Special Revenue
65
Capital
Projects
Total
Other
LibraryGovernmental
ExpansionFunds
-$ 186,006$
- 1,237,806
- 123,812
2,828 12,385
- 13,423
2,828 1,573,432
- 375,619
5,458 5,458
- 330,000
- 685,276
5,458 1,396,353
(2,630) 177,079
(405) (133,838)
(405) (133,838)
(3,035) 43,241
354,394 1,769,843
351,359$ 1,813,084$
CITY OF SARATOGA
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
CAPITAL IMPROVEMENT
FOR THE YEAR ENDED JUNE 30, 2010
66
Variance with
Final Budget
Budgeted AmountsActualPositive
OriginalFinalAmounts(Negative)
REVENUES:
Licenses & permits303,903$ 303,903$ 424,737$ 120,834$
Fines & forfeitures- - 8,010 8,010
Intergovermental - federal3,772,906 3,772,906 430,387 (3,342,519)
Intergovermental - state1,844,630 1,844,630 934,083 (910,547)
Intergovermental - other79,724 79,724 99,712 19,988
Use of money and property- - 41,640 41,640
Other revenue359,940 411,940 221,897 (190,043)
Total revenues 6,361,103 6,413,103 2,160,466 (4,252,637)
EXPENDITURES:
Capital outlay10,340,221 10,572,313 2,578,501 7,993,812
Total expenditures 10,340,221 10,572,313 2,578,501 7,993,812
REVENUES OVER
(UNDER) EXPENDITURES (3,979,118) (4,159,210) (418,035) 3,741,175
OTHER FINANCING SOURCES (USES):
Transfers in332,971 1,045,443 845,979 (199,464)
Transfers out(106,000) (232,983) (232,983) -
Total other financing sources (uses)226,971 812,460 612,996 (199,464)
Net change in fund balances (3,752,147)$ (3,346,750)$ 194,961 3,541,711$
FUND BALANCES:
Beginning of year3,510,980
End of year 3,705,941$
CITY OF SARATOGA
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
LIGHTING & LANDSCAPING ASSESSMENT DISTRICT SPECIAL REVENUE FUND
FOR THE YEAR ENDED JUNE 30, 2010
67
Variance with
Final Budget
Budgeted AmountsActualPositive
OriginalFinalAmounts(Negative)
REVENUES:
Property taxes158,467$ 158,467$ 186,006$ 27,539$
Special assessments269,681 269,681 266,609 (3,072)
Use of money and property11,210 11,210 3,478 (7,732)
Total revenues 439,358 439,358 456,093 16,735
EXPENDITURES:
Current:
Public works 526,560 536,060 375,619 160,441
Total expenditures 526,560 536,060 375,619 160,441
REVENUES OVER
(UNDER) EXPENDITURES (87,202) (96,702) 80,474 177,176
Net change in fund balances (87,202)$ (96,702)$ 80,474 177,176$
FUND BALANCES:
Beginning of year359,916
End of year 440,390$
CITY OF SARATOGA
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
COMMUNITY DEVELOPMENT BLOCK GRANT SPECIAL REVENUE FUND
FOR THE YEAR ENDED JUNE 30, 2010
68
Variance with
Final Budget
Budgeted AmountsActualPositive
OriginalFinalAmounts(Negative)
REVENUES:
Intergovernmental - Other332,897$ 332,897$ 123,812$ (209,085)$
Use of money and property3,000 3,000 858 (2,142)
Other revenue- - 13,333 13,333
Total revenues 335,897 335,897 138,003 (197,894)
OTHER FINANCING SOURCES (USES):
Transfers in13,000 - - -
Transfers out(140,203) (332,897) (133,433) 199,464
Total other financing sources (uses)(127,203) (332,897) (133,433) 199,464
Net change in fund balances 208,694$ 3,000$ 4,570 1,570$
FUND BALANCES:
Beginning of year124,172
End of year 128,742$
CITY OF SARATOGA
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
LIBRARY BOND DEBT SERVICE FUND
FOR THE YEAR ENDED JUNE 30, 2010
69
Variance with
Final Budget
Budgeted AmountsActualPositive
OriginalFinalAmounts(Negative)
REVENUES:
Special assessments950,000$ 950,000$ 971,197$ 21,197$
Use of money and property10,000 10,000 5,311 (4,689)
Total revenues 960,000 960,000 976,508 16,508
EXPENDITURES:
Debt service:
Principal330,000 330,000 330,000 -
Interest and fiscal charges685,556 685,556 685,276 280
Total expenditures 1,015,556 1,015,556 1,015,276 280
REVENUES OVER
(UNDER) EXPENDITURES (55,556) (55,556) (38,768) 16,788
Net change in fund balances (55,556)$ (55,556)$ (38,768) 16,788$
FUND BALANCES:
Beginning of year931,361
End of year 892,593$
CITY OF SARATOGA
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
LIBRARY EXPANSION CAPITAL PROJECTS FUND
FOR THE YEAR ENDED JUNE 30, 2010
70
Variance with
Final Budget
Budgeted AmountsActualPositive
OriginalFinalAmounts(Negative)
REVENUES:
Use of money and property10,000$ 10,000$ 2,828$ (7,172)$
Total revenues 10,000 10,000 2,828 (7,172)
EXPENDITURES:
Current:
Capital outlay15,000 15,000 5,458 9,542
Total expenditures 15,000 15,000 5,458 9,542
REVENUES OVER
(UNDER) EXPENDITURES (5,000) (5,000) (2,630) 2,370
OTHER FINANCING SOURCES (USES):
Transfers out- (405) (405) -
Total other financing sources (uses)- (405) (405) -
Net change in fund balances (5,000)$ (5,405)$ (3,035) 2,370$
FUND BALANCES:
Beginning of year354,394
End of year 351,359$
71
FIDUCIARY FUND FINANCIAL STATEMENTS
Agency Funds
Community Access Television Trust - This fund accounts for funds of the Saratoga Community Access
Television (CATV) Trust Fund Foundation.
CITY OF SARATOGA
STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
AGENCY FUND
FOR THE YEAR ENDED JUNE 30, 2010
72
BalanceBalance
Cable T.V. Trust July 1, 2009AdditionsDeductionsJune 30, 2010
ASSETS
Cash and investments69,769$ 69,060$ (47,465)$ 91,364$
Receivables:
Accounts14,573 18,352 (14,573) 18,352
Interest261 126 (261) 126
Total assets 84,603$ 87,538$ (62,299)$ 109,842$
LIABILITIES
Deposits payable84,603$ 87,538$ (62,299)$ 109,842$
The accompanying notes are an integral part of these financial statements.
73
INTERNAL SERVICE FUNDS
Liability/Risk Management Insurance Fund – Accounts for insurance premiums, self-insurance portion
of claims, and administrative cost associated with settling claims. Charges made to operating departments
are based on liability risk and claim occurrence history.
Worker’s Compensation Self-insurance Fund – Accounts for insurance premiums, self insured portion
of claims, and administrative costs associated with settling claims. Charges made to operating
departments are based on liability risk and claim occurrence history.
Office Stores Fund - Photocopy equipment, postage and bulk mail meter expenses are controlled at one
source point and expended to the departments as goods or services are utilized.
Information Technology Services Fund – Supports the delivery of technology based services and
infrastructure, including desktop support, network systems, technology upgrades and initiatives,
community systems, and associated information technology equipment.
Vehicle & Equipment Maintenance Fund – Accounts for the cost of operating and maintaining
automotive equipment used for service operations in various City departments.
Building Maintenance Fund – Accounts for operating costs associated with building maintenance.
Expenses include custodial supplies and services, maintenance and repair, utilities, and staffing costs.
Vehicle & Equipment Replacement Fund – Established to accumulate funding for the replacement of
vehicles and equipment. Replacement costs are charged to program over the asset’s life span, reflective
of usage.
Information Technology Equipment Replacement Fund – Established to accumulate funding for the
replacement of information technology equipment. Replacement costs are charged to departments over
the asset’s lifespan, reflective of usage.
CITY OF SARATOGA
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF NET ASSETS
JUNE 30, 2010
74
Liability /
Risk Workers'Office
ManagementCompensationStores
ASSETS
Current assets:
Cash and investments298,431$ 197,763$ 27,432$
Accounts receivable3,201 2,177 -
Total current assets301,632 199,940 27,432
Noncurrent assets:
Capital assets:
Machinery and equipment- - -
Less: accumulated depreciation- - -
Total capital assets (net of
accumulated depreciation) - - -
Total assets 301,632 199,940 27,432
LIABILITIES
Liabilities:
Current assets:
Accounts payable778 895 602
Accrued payroll1,691 454 -
Claims payable54,601 - -
Total current liabilities57,070 1,349 602
NET ASSETS
Investment in capital assets- - -
Unrestricted244,562 198,591 26,830
Total net assets244,562$ 198,591$ 26,830$
The accompanying notes are an integral part of these financial statements
75
Information
InformationVehicleVehicleTechnology
Technologyand EquipmentBuildingand EquipmentEquipment
ServicesMaintenanceMaintenanceReplacementReplacementTotal
231,679$ 61,264$ 249,239$ 236,230$ 196,532$ 1,498,570$
- - - - - 5,378
231,679 61,264 249,239 236,230 196,532 1,503,948
- - - 623,819 90,240 714,059
- - - (359,352) (63,168) (422,520)
- - - 264,467 27,072 291,539
231,679 61,264 249,239 500,697 223,604 1,795,487
7,524 3,350 24,058 - 9,846 47,053
10,214 3,655 22,612 - - 38,626
- - - - - 54,601
17,738 7,005 46,670 - 9,846 140,280
- - - 264,467 27,072 291,539
213,941 54,259 202,569 236,230 186,686 1,363,668
213,941$ 54,259$ 202,569$ 500,697$ 213,758$ 1,655,207$
CITY OF SARATOGA
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN FUND NET ASSETS
FOR THE YEAR ENDED JUNE 30, 2010
76
Liability /
Risk Workers'Office
ManagementCompensationStores
Operating revenues:
Charges for services250,000$ 250,000$ 23,000$
Other operating revenues9,056 27,692 11,693
Total operating revenues259,056 277,692 34,693
Operating expenses:
Cost of services- - -
Administration217,366 202,136 47,496
Depreciation- - -
Total operating expenses217,366 202,136 47,496
Operating income41,690 75,556 (12,803)
Transfers out- - -
Change in net assets41,690 75,556 (12,803)
Total net assets - beginning202,872 123,035 39,633
Total net assets - ending244,562$ 198,591$ 26,830$
The accompanying notes are an integral part of these financial statements
77
Information
InformationVehicleVehicleTechnology
Technologyand EquipmentBuildingand EquipmentEquipment
ServicesMaintenanceMaintenanceReplacementReplacementTotal
400,000$ 208,000$ 704,000$ 110,000$ 58,010$ 2,003,010$
963 5,214 - - 54,618
400,963 208,000 709,214 110,000 58,010 2,057,628
- 210,396 715,486 14,640 31,614 972,136
361,859 - - - - 828,857
- - - 123,529 18,048 141,577
361,859 210,396 715,486 138,169 49,662 1,942,570
39,104 (2,396) (6,272) (28,169) 8,348 115,058
- - - - (155,000) (155,000)
39,104 (2,396) (6,272) (28,169) (146,652) (39,942)
174,837 56,655 208,841 528,866 360,410 1,695,149
213,941$ 54,259$ 202,569$ 500,697$ 213,758$ 1,655,207$
CITY OF SARATOGA
INTERNAL SERVICE FUNDS
COMBINING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2010
78
Liability /
Risk Workers'Office
ManagementCompensationStores
Cash flows from operating activities:
Receipts from customers and users 260,198$ 278,580$ 34,693$
Payments to suppliers(243,965) (192,833) (49,854)
Payments to employees(21,982) (8,638) -
Net cash provided by operating activities(5,749) 77,109 (15,161)
Cash flows from noncapital financing activities:
Operating transfers out- - -
Net cash used in nonoperating activities- - -
Cash flows from capital activities:
Acquisition of capital assets- - -
Net cash used for acquisition of capital assets- - -
Net increase (decrease) in cash and cash equivalents(5,749) 77,109 (15,161)
Cash and cash equivalents, beginning of year304,180 120,654 42,593
Cash and cash equivalents, ending of year298,431$ 197,763$ 27,432$
Reconciliation of operating income to net cash provided
by operating activities:
Operating income (loss)41,690$ 75,556$ (12,803)$
Adjustments to reconcile operating income (loss)
to net cash provided (used) by operating activities:
Depreciation- - -
Change in operating assets and liabilities:
Decrease in accounts receivables1,142 888 -
(Decrease) increase in accounts payable(21,657) 592 (2,358)
(Decrease) in claims payable(28,615) - -
Increase in accured payroll1,691 73 -
Net cash provided (used) by operating activities(5,749)$ 77,109$ (15,161)$
79
Information
InformationVehicleVehicleTechnology
Technologyand EquipmentBuildingand EquipmentEquipment
ServicesMaintenanceMaintenanceReplacementReplacementTotal
400,963$ 208,000$ 709,214$ 112,530$ 58,010$ 2,062,188$
(169,423) (136,740) (316,259) (14,640) (22,961) (1,146,675)
(185,740) (72,520) (414,558) - - (703,438)
45,800 (1,260) (21,603) 97,890 35,049 212,075
- - - - (155,000) (155,000)
- - - - (155,000) (155,000)
- - - (12,345) - (12,345)
- - - (12,345) - (12,345)
45,800 (1,260) (21,603) 85,545 (119,951) 44,730
185,879 62,524 270,842 150,685 316,483 1,453,840
231,679$ 61,264$ 249,239$ 236,230$ 196,532$ 1,498,570$
39,104$ (2,396)$ (6,272)$ (28,169)$ 8,348$ 115,058$
- - - 123,529 18,048 141,577
- - - 2,530 - 4,560
2,999 159 (20,046) - 8,653 (31,658)
- - - - - (28,615)
3,697 977 4,715 - - 11,153
45,800$ (1,260)$ (21,603)$ 97,890$ 35,049$ 212,075$
80
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81
CAPITAL ASSETS
USED IN THE OPERATION OF GOVERNMENTAL FUNDS
82
CITY OF SARATOGA
CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS
COMPARATIVE SCHEDULE BY SOURCE
JUNE 30, 2010 AND 2009
83
20102009
Governmental Funds Capital Assets:
Land and land improvements12,984,078$ 10,585,106$
Buildings and structures23,412,763 23,156,758
Machinery and equipment1,567,785 1,324,426
Infrastructure104,425,507 103,549,229
Construction in progress4,443,360 6,595,346
Total Governmental Funds Capital Assets 146,833,493 145,210,865
Accumulated depreciation(25,204,168) (23,529,120)
Total Governmental Funds Capital Assets, Net 121,629,325$ 121,681,745$
Investments in Governmental Funds
Capital Assets by Source:
General Fund115,548,433$ 115,642,022$
Special revenue funds974,487 1,008,688
Capital projects funds30,213,225 28,462,807
Donations97,348 97,348
Accumulated depreciation(25,204,168) (23,529,120)
Total Governmental Funds Capital Assets 121,629,325$ 121,681,745$
1 This schedule presents only the capital asset balances related to governmental funds. Accordingly
the capital assets reported in internal service funds are excluded from the above amounts. Generally,
the capital assets of internal service funds are included as governmental activities in the
statement of net assets.
CITY OF SARATOGA
CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS
SCHEDULE BY FUNCTION AND ACTIVITY1
JUNE 30, 2010
84
LandBuildings
and Landand
ImprovementsStructures
Function and Activity
General and intergovernmental services:
Management services-$ 438,036$
Administrative services- 167,585
Intergovernmental services118,183 3,138,641
Total General and Intergovernmental Services:118,183 3,744,262
Public safety:
Police services- -
Code enforcement- -
Total Public Safety:- -
Public works:
Streets and sidewalks835,155 30,628
Parks/open space2,637,061 2,656,850
Total Public Works:3,472,216 2,687,478
Community services7,651,215 2,666,124
Community development services1,742,464 14,314,899
Total Governmental Funds Capital Assets12,984,078 23,412,763
Accumulated depreciation- (5,471,113)
Total Governmental Funds Capital Assets, Net 12,984,078$ 17,941,650$
1 This schedule presents only the capital asset balances related to governmental funds. Accordingly
the capital assets reported in internal service funds are excluded form the above amounts. Generally,
the capital assets of internal service funds are included as governmental activities in the
statement of net assets.
85
MachineryConstruction
andin
EquipmentInfrastructureProgressTotal
405,358$ -$ 99,031$ 942,425$
74,491 - - 242,076
47,560 - - 3,304,384
527,409 - 99,031 4,488,885
27,813 - - 27,813
7,548 - - 7,548
35,361 - - 35,361
483,632 104,342,490 1,914,299 107,606,204
270,483 - - 5,564,394
754,115 104,342,490 1,914,299 113,170,598
220,753 83,017 2,402,019 13,023,128
30,147 - 28,011 16,115,521
1,567,785 104,425,507 4,443,360 146,833,493
(1,178,957) (18,554,098) - (25,204,168)
388,828$ 85,871,409$ 4,443,360$ 121,629,325$
CITY OF SARATOGA
CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS
SCHEDULE BY FUNCTION AND ACTIVITY
JUNE 30, 2010
86
GovernmentalGovernmental
Funds CapitalFunds Capital
AssetsAssets
July 1, 2009AdditionsDeletionsJune 30, 2010
Function and Activity
General and intergovernmental services:
Management services474,684$ 490,608$ (22,867)$ 942,425$
Administrative services252,449 - (10,373) 242,076
Intergovernmental services3,304,385 - (1) 3,304,384
Total General and Intergovernmental Services:4,031,518 490,608 (33,241) 4,488,885
Public safety:
Police services27,813 - - 27,813
Code enforcement7,548 - - 7,548
Total Public Safety:35,361 - - 35,361
Public works:
Streets and sidewalks107,000,101 653,263 (47,160) 107,606,204
Parks/open space5,606,449 (42,055) 5,564,394
Total Public Works:112,606,550 653,263 (89,215) 113,170,598
Community services12,413,046 659,859 (49,777) 13,023,128
Community development services16,124,390 4,646 (13,515) 16,115,521
Total Governmental Funds Capital Assets 145,210,865 1,808,376 (185,748) 146,833,493
Accumulated depreciation(23,529,120) 127,790 (1,802,838) (25,204,168)
Total Governmental Funds Capital Assets, Net 121,681,745$ 1,936,166$ (1,988,586)$ 121,629,325$
1 This schedule presents only the capital asset balances related to governmental funds. Accordingly
the capital assets reported in internal service funds are excluded form the above amounts. Generally,
the capital assets of internal service funds are included as governmental activities in the
statement of net assets.
STATISTICAL SECTION
87
This part of the City of Saratoga's comprehensive annual financial report presents detailed information as
a context for understanding what the information in the financial statements, note disclosures and required
supplementary information says about the government's overall financial health.
Contents Page
Financial Trends
These schedules contain trend information to help the reader understand how
the government's financial performance and well being have changed over time. 88-92
Revenue Capacity
These schedules contain information to help the reader assess the government’s
most significant local revenue source; property tax. 93-97
Debt Capacity
These schedules present information to help the reader assess the affordability
of the government's current levels of outstanding debt and the government's ability
to issue additional debt in the future. 98-101
Demographic and Economic Information
These schedules offer demographic and economic indicators to help the reader
understand the environment within which the government's financial activities
take place. 102-103
Operating Information
These schedules contain service and infrastructure data to help the reader understand
how the information in the government's financial report relates to the services the
government provides and the activities it performs. 104-106
The City of Saratoga implemented GASB Statement No. 34 in fiscal year 2001/02; schedules presenting
government-wide information include information beginning in that year.
The City of Saratoga implemented GASB Statement No. 44 in fiscal year 2007/08; newly required
schedules presenting information in the Statistical Section include the earliest available information.
CITY OF SARATOGA
NET ASSETS BY COMPONENT
LAST SIX YEARS
(ACCRUAL BASIS OF ACCOUNTING)
88
(amounts expressed in thousands)
200520062007200820092010
Primary government
Governmental activities
Investment in capital assets,
net of related debt 105,784$ 107,100$ 108,102$ 109,818$ 108,818$ 108,966$
Restricted6,328 5,370 5,928 5,940 5,281 5,519
Unrestricted6,789 9,955 8,593 9,710 8,759 8,533
Total primary government118,901$ 122,425$ 122,623$ 125,468$ 122,858$ 123,018$
Source: CAFR
Fiscal Year
$95,000
$100,000
$105,000
$110,000
$115,000
$120,000
$125,000
$130,000
200520062007200820092010
NetAssetsbyComponent
Investmentincapitalassets,netofrelateddebt Restricted Unrestricted
CITY OF SARATOGA
CHANGES IN NET ASSETS
LAST SIX YEARS
(ACCRUAL BASIS OF ACCOUNTING)
89
(amounts expressed in thousands)
200520062007200820092010
Expenses:
Governmental activities:
General and intergovernmental services4,160$ 3,473$ 4,532$ 6,293$ 5,595$ 3,729$
Public safety3,736 3,427 3,844 4,166 4,211 4,339
Public works3,829 4,752 6,425 5,325 7,643 6,535
Community services1,929 1,395 1,437 1,286 1,634 1,711
Community development services2,349 2,226 1,993 2,032 2,000 1,751
Interest on long-term debt (unallocated)760 754 768 714 697 677
Total governmental activities expenses16,763 16,027 18,999 19,816 21,780 18,742
Program revenues:
Charges for services:
General and intergovernmental services- 31 452 1,787 133 125
Public safety141 122 - 411 520 425
Public works1,988 1,890 528 1,705 2,379 2,535
Community services757 1,008 604 911 935 917
Community development services1,890 2,665 1,328 2,110 1,802 1,586
Operating grants and contributions1,218 1,549 2,155 151 228 275
Capital grants and contributions865 1,568 1,282 1,715 339 674
Total governmental activates program revenues6,859 8,833 6,349 8,790 6,336 6,537
Net (expense) revenue and change in net assets(9,904) (7,194) (12,650) (11,026) (15,444) (12,205)
General revenue and other changes in net assets
Taxes:
Property taxes4,841 5,652 5,772 8,099 8,336 8,371
Sales taxes1,011 988 995 1,058 1,043 955
Local taxes1,143 1,288 1,099 694 663 560
Franchise taxes995 1,040 1,187 1,625 1,657 1,664
Motor vehicle in-lieu420 718 177 149 116 101
Total Taxes8,410 9,686 9,230 11,625 11,815 11,651
Intergovernmental- - 673 841 474 522
Investment earnings283 709 2,813 1,057 397 101
Other revenues193 323 132 348 148 91
Total general revenues8,886 10,718 12,848 13,871 12,834 12,365
Change in net assets(1,018) 3,524 198 2,845 (2,610) 160
Net assets - beginning of year119,919 118,901 122,425 122,623 125,468 122,858
Net assets - end of year118,901$ 122,425$ 122,623$ 125,468$ 122,858$ 123,018$
Source: CAFR
Fiscal Year
CITY OF SARATOGA
FUND BALANCE OF GOVERNMENTAL FUNDS
LAST SIX YEARS
(ACCRUAL BASIS OF ACCOUNTING)
90
(amounts expressed in thousands)
200520062007200820092010
General fund:
Reserved-$ 1$ 64$ 1$ 1$ 1$
Unreserved6,979 10,378 9,097 10,396 8,228 8,010
Total general fund6,979$ 10,379$ 9,161$ 10,397$ 8,229$ 8,011$
All other governmental funds:
Reserved
Debt service funds855$ 865$ 746$ 854$ 931$ 893$
Unreserved, reported in:
Special revenue funds201 919 844 318 484 569
Capital project funds5,322 3,586 4,338 4,768 3,865 4,057
Total all other governmental funds6,378$ 5,370$ 5,928$ 5,940$ 5,280$ 5,519$
Source: CAFR
Fiscal Year
$
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
General
Reserved
General
Unreserved
DebtServiceSpecial
Revenue
Capital
Projects
FundBalancesofGovernmentalFunds
2005
2006
2007
2008
2009
2010
CITY OF SARATOGA
GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE
LAST SIX YEARS
(ACCRUAL BASIS OF ACCOUNTING)
91
(amounts expressed in thousands)
200520062007200820092010
Tax revenues:
Property taxes4,841$ 5,652$ 5,772$ 8,099$ 8,336$ 8,371$
Special assessments1,476 1,369 271 1,392 1,368 1,247
Sales taxes1,011 988 995 1,058 1,043 955
Local taxes1,143 1,288 1,099 694 663 560
Franchise taxes995 1,040 1,187 1,625 1,657 1,664
Motor vehicle in-lieu420 718 177 149 116 101
Total tax revenues9,886$ 11,055$ 9,501$ 13,017$ 13,183$ 12,898$
Source: CAFR
Fiscal Year
$
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
PropertytaxesSpecial
assessments
SalestaxesLocaltaxesMotorvehicle
inlieu
Franchise
taxes
TaxRevenuesbySource
2005
2006
2007
2008
2009
2010
CITY OF SARATOGA
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS
LAST SIX YEARS
(ACCRUAL BASIS OF ACCOUNTING)
92
(amounts expressed in thousands)
200520062007200820092010
Revenues:
Property taxes4,893$ 5,652$ 4,758$ 7,877$ 8,335$ 8,371$
Special assessments1,411 1,370 1,285 1,566 1,368 1,247
Sales taxes1,011 987 995 1,058 1,043 954
Other local taxes851 1,288 1,126 773 663 560
Licensed and permits100 79 1,340 1,671 1,460 1,489
Fines and forfeitures162 259 396 344 360 359
Intergovernmental - federal- - - - - 430
Intergovernmental - state1,375 2,660 3,631 1,641 1,283 1,258
Intergovernmental - other671 976 629 777 290 258
Franchise fees1,294 1,041 1,187 1,622 1,657 1,664
Use of money any property664 752 2,813 924 794 595
Other revenues153 1,719 151 326 1,966 1,794
Current services charges3,093 2,715 900 4,184 - -
Total tax revenues15,768 19,498 19,211 22,763 19,219 18,979
Expenditures:
Current:
General and intergovernmental services3,238 3,346 3,806 4,083 3,330 3,102
Public safety3,731 3,423 3,824 4,166 4,206 4,349
Public works2,599 3,501 5,714 4,717 4,700 4,730
Community services1,875 1,210 1,381 1,262 1,424 1,223
Community development services1,990 1,847 1,962 2,026 2,450 2,111
Capital outlay1,777 2,908 2,130 4,246 4,060 2,584
Debt service:
Principal255 270 280 295 310 330
Interest and fiscal charges766 760 774 721 705 685
Total expenditures16,231 17,265 19,871 21,515 21,185 19,114
Excess of revenues
over (under) expenditures (463) 2,233 (660) 1,247 (1,966) (135)
Other financing sources (uses):
Transfers in2,492 499 3,422 2,241 2,043 1,172
Transfers out(2,492) (499) (3,422) (2,241) (2,043) (1,017)
Total other financing sources (uses)- - - - - 155
Net change in fund balances(463)$ 2,233$ (660)$ 1,247$ (1,966)$ 20$
Debt as a percentage of noncapital expenditures7.06%7.17%5.94%5.62%4.89%5.80%
Source: CAFR
Fiscal Year
CITY OF SARATOGA
PROPERTY TAX RATES – DIRECT AND OVERLAPPING GOVERNMENTS
LAST SIX YEARS
(ACCRUAL BASIS OF ACCOUNTING)
93
(Property Tax Rates per $100 of Assessed Value)
200520062007200820092010
General1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
County Retirement Levy0.0388 0.0388 0.0388 0.0388 0.0388 0.0388
County Library0.0024 0.0024 0.0024 0.0024 0.0024 0.0024
City of Saratoga0.0148 0.0117 0.0096 0.0113 0.0104 0.0094
Campbell School District0.0529 0.0512 0.0508 0.0475 0.0524 0.0552
Cupertino Elementary School District0.0360 0.0350 0.0289 0.0337 0.0306 0.0312
Moreland Elementary School District0.0612 0.0561 0.0556 0.0569 0.0565 0.0594
Saratoga School District0.0361 0.0356 0.0351 0.0363 0.0363 0.0388
Campbell Union High School District0.0197 0.0224 0.0198 0.0285 0.0299 0.0314
Fremont Union High School District0.0268 0.0260 0.0243 0.0241 0.0339 0.0306
Los Gatos-Saratoga Joint Union High School District0.0409 0.0371 0.0651 0.0345 0.0330 0.0352
Foothill-DeAnza Community College District0.0129 0.0119 0.0346 0.0113 0.0123 0.0322
West Valley-Mission Community College District- 0.0140 0.0126 0.0118 0.0032 0.0140
Saratoga Fire District0.0017 0.0052 0.0049 0.0053 0.0053 0.0058
Santa Clara Valley Water District - State Water Project0.0086 0.0069 0.0070 0.0067 0.0059 0.0071
Santa Clara Valley Water District - Zone W-10.0006 0.0009 0.0002 0.0040 0.0002 0.0002
Source: California Municipal Statistics, Inc.
Fiscal Year
CITY OF SARATOGA
ASSESSED VALUE OF TAXABLE PROPERTY
LAST SIX YEARS
94
(amounts expressed in thousands)
Fiscal
Year
EndedResidentialCommercialIndustrialVacantOther
June 30PropertyPropertyPropertyInstitutionalPropertyProperty
20057,114,095$ 166,071$ 8,746$ 33,509$ 70,276$ 35,127$
20067,883,965 177,149 8,921 38,027 90,611 32,858
20078,467,894 187,142 9,099 45,706 107,228 39,536
20089,025,628 208,369 9,281 50,590 110,656 49,023
20099,605,309 213,951 9,467 51,052 128,898 43,240
20109,729,087 231,691 9,656 57,495 110,225 44,856
Source:1 HdL Coren & Cone, Santa Clara County Assessor 2007/08 Combined Tax Rolls
Other property includes: Irrigated, Dry Farm, Recreational Government,
and Miscellaneous
2 California Municipal Statistics, Inc.
$
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
200520062007200820092010
TotalAssessedProperty
Unsecured
Other
Vacant
Institutional
Industrial
Commercial
Residential
95
Total2
TotalLess:Total Taxable1 Direct
UnsecuredAssessedTax ExemptAssessedTax
PropertyPropertyReal PropertyValueRate
42,965$ 7,470,789$ (76,932)$ 7,393,857$ 1.0560
46,874 8,278,405 (133,951) 8,144,454 1.0529
39,764 8,896,369 (140,859) 8,755,510 1.0508
35,775 9,489,322 (159,369) 9,329,953 1.0525
43,933 10,095,850 (161,488) 9,934,362 1.0516
58,210 10,241,220 (173,628) 10,067,592 1.0506
CITY OF SARATOGA
PRINCIPAL PROPERTY TAXPAYERS
CURRENT YEAR AND FIVE YEARS AGO
JUNE 30, 2010
96
(amounts expressed in thousands)
% of Total% of Total
TaxableTaxableTaxableTaxable
AssessedAssessedAssessedAssessed
TaxpayerValueRankValueValueRankValue
Cupertino Village Associates, LLC34,889$ 10.35%
Quito Village Group, LLC31,110 20.31%12,901 30.22%
John M. & Abby J. Sobrato17,643 30.18%
Gregpenn Properties, LLC14,424 40.14%
San Jose Water Works13,308 50.13%9,901 50.13%
John I. Keller12,208 60.12%
David J. & Terri E. Morrison10,604 70.11%9,423 60.13%
Argonaut Associates, LLV10,510 80.10%12,005 30.13%
Ashok Krishnamurthi10,439 90.10%9,282 70.13%
Rakesh & Dipti Bl Mathur10,200 100.10%
Odd Fellows Home of California22,325 10.53%
Saratoga Office Center Partners, LLC13,543 20.26%
David C. & Roxanne N. Petterschmidt9,241 80.12%
Deloise A. Jordan8,918 90.12%
David L. House8,800 100.12%
Assessed Value10,067,592$ 7,393,858$
1 Earliest information available
Source: California Municipal Statistics, Inc./HdL Coren & Cone
201020051
CITY OF SARATOGA
PROPERTY TAX LEVIES AND COLLECTIONS
LAST SIX YEARS
97
Fiscal YearTotal TaxCollections in
EndedLevy forSubsequent
June 30Fiscal YearAmountPercentageYearsAmountPercentage
20054,972,875$ 4,839,668$ 97.3%133,207$ 4,972,875$ 100.0%
20065,243,038 5,112,766 97.5%130,272 5,243,038 100.0%
20076,032,558 6,040,230 100.1%(7,672) 6,032,558 100.0%
20088,108,364 8,106,743 100.0%3,621 8,110,364 100.0%
20098,332,184 8,335,805 100.0%- 8,335,805 100.0%
20108,371,396 8,381,134 100.1%(9,738) 8,371,396 100.0%
Source: City of Saratoga
Note:Information on this schedule is not provided from the County of Santa Clara. An estimate has been
used for the total tax levy for the fiscal year based upon collections of prior year property taxes in
the next fiscal year.
Collected within the
Fiscal Year of the LevyTotal Collections to Date
CITY OF SARATOGA
RATIOS OF OUTSTANDING DEBT BY TYPE
LAST SIX YEARS
98
(amounts expressed in thousands, except per capita amounts)
200520062007200820092010
Governmental activities
General obligation bonds14,440$ 14,170$ 13,890$ 13,595$ 13,285$ 12,955$
Total primary government14,440$ 14,170$ 13,890$ 13,595$ 13,285$ 12,955$
Percentage of Personal Income1 0.00%0.00%0.00%0.00%n/an/a
Per capita2 468 460 443 430 419 405
Source: CAFR
1Bureau of Economic Analysis - personal income information only available through 2008
San Jose-Sunnyvale-Santa Clara region
2Population information from California State Controller's Office
Fiscal Year
CITY OF SARATOGA
RATIOS OF GENERAL BONDED DEBT OUTSTANDING
LAST SIX YEARS
99
(amounts expressed in thousands, except per capita amounts)
200520062007200820092010
General obligation bonds14,440$ 14,170$ 13,890$ 13,595$ 13,285$ 12,955$
Less: Amount available in debt service fund(855) (865) (747) (854) (926) (890)
Total primary government13,585$ 13,305$ 13,143$ 12,741$ 12,359$ 12,065$
Percentage of actual taxable
value of property0.18%0.16%0.15%0.14%0.12%0.12%
Per capita1 440 431 419 403 390 377
Source: CAFR
1Population information from California State Controller's Office
Fiscal Year
CITY OF SARATOGA
DIRECT AND OVERLAPPING
GOVERNMENTAL ACTIVITIES DEBT
100
(amounts expressed in thousands)
Estimated
EstimatedShare of
DebtPercentageOverlapping
OutstandingApplicable1 Debt
Direct Debt:
City of Saratoga12,955 100.000%12,955
Overlapping Tax and Assessment Debt:
Santa Clara County350,000$ 3.729%13,052$
Santa Clara Valley Water District, Zone W-1910 4.023%37
Foothill-De Anza Community College District479,279 1.716%8,224
West Valley Community College District215,070 11.726%25,219
Campbell Union High School District136,395 5.544%7,562
Fremont Union High School District202,415 3.686%7,461
Los Gatos-Saratoga Joint Union High School District58,915 40.910%24,102
Campbell Union School District98,223 6.846%6,724
Cupertino Union School District127,265 6.179%7,864
Moreland School District73,272 12.960%9,496
Saratoga Union School District49,432 86.175%42,598
Saratoga Fire Protection District5,049 97.424%4,919
Santa Clara Valley Water District Benefit Assessment152,440 3.729%5,684
Total Overlapping Tax and Assessment Debt162,942
Overlapping General Fund Debt:
Santa Clara County General Fund Obligations825,070 3.729%30,767$
Santa Clara County Pension Obligations388,045 3.729%14,470
Santa Clara County Board of Education
Certificates of Participation13,580 3.729%506
Santa Clara County Vector Control District
Certificates of Participation3,965 3.729%148
Foothill-De Anza Community College District
Certificates of Participation23,450 1.716%402
West Valley-Mission College District
General Fund Obligations56,120 11.726%6,581
Los Gatos-Saratoga Joint Union High School District
Certificates of Participation10,205 40.910%4,175
Saratoga Union School District
Certificates of Participation6,380 86.175%5,498
Midpeninsula Open Space Park District
General Fund Obligations113,788 6.277%7,142
Total Overlapping General Fund Debt69,689
Combined Total Debt2 245,586$
1Percentage of overlapping agency's assessed valuation located within boundaries of the city.
2Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation
bonds and non-bonded capital lease obligations.
Source: California Municipal Statistics, Inc.
CITY OF SARATOGA
LEGAL DEBT MARGIN INFORMATION
LAST SIX YEARS
101
(amounts expressed in thousands)
200520062007200820092010
Debt Limit1,120,618$ 1,241,761$ 1,334,455$ 1,423,398$ 1,514,378$ 1,536,183$
Total net debt applicable to limit13,585 13,305 13,143 12,741 12,359 12,065
Legal debt margin1,107,033$ 1,228,456$ 1,321,312$ 1,410,657$ 1,502,019$ 1,524,118$
Total net debt applicable to the limit
as a percentage of debt limit 1.21%1.07%0.98%0.90%0.82%0.79%
Legal debt margin calculation
Assessed value7,393,857$ 8,144,454$ 8,755,510$ 9,329,953$ 9,934,362$ 10,067,592$
Add back: exempt real property76,932 133,951 140,859 159,369 161,488 173,628
Total assessed value7,470,789$ 8,278,405$ 8,896,369$ 9,489,322$ 10,095,850$ 10,241,220$
Debt limit (15% of total assessed value)1,120,618$ 1,241,761$ 1,334,455$ 1,423,398$ 1,514,378$ 1,536,183$
Debt applicable to limit:
General obligation bonds14,440$ 14,170$ 13,890$ 13,595$ 13,285$ 12,955$
Less: Amount available in debt service fund(855) (865) (747) (854) (926) (890)
Total net debt applicable to limit13,585$ 13,305$ 13,143$ 12,741$ 12,359$ 12,065$
Legal debt margin1,107,033$ 1,228,456$ 1,321,312$ 1,410,657$ 1,502,019$ 1,524,118$
Source: CAFR
Fiscal Year
CITY OF SARATOGA
DEMOGRAPHIC AND ECONOMIC STATISTICS
LAST SIX YEARS
102
PersonalPer Capita
FiscalCityIncomePersonalLaborUnemployment
YearPopulation1 (in thousands)2 Income2 Force3 Rate3
200530,850 89,615 51,418 12,600 2.5%
200630,835 98,252 55,754 12,700 2.1%
200731,352 105,999 59,338 12,900 2.3%
200831,592 105,979 58,531 13,100 3.2%
200931,679 n/an/a13,300 6.0%
200931,997 n/an/a12,500 5.8%
Source:1Popluaton information from California State Controller's Office
2Bureau of Economic Analysis - San Jose-Sunnyvale-Santa Clara region
3State of California - Employment Development Department
10,000
15,000
20,000
25,000
30,000
35,000
200520062007200820092010
LaborForcevs.Population
Population
LaborForce
CITY OF SARATOGA
PRINCIPAL EMPLOYERS
CURRENT YEAR AND FIVE YEARS AGO AT JUNE 30, 2010
103
PercentagePercentage
of Total Cityof Total City
EmployerEmployeesRankEmploymentEmployeesRankEmployment
Gene's Fine Foods85 10.68%85 11.39%
Safeway65 20.52%65 21.06%
Saratoga Country Club65 30.52%65 31.06%
Windermere SVP27 40.22%27 50.44%
Longs Drug20 50.16%20 60.33%
Classic Car Wash20 60.16%20 70.33%
Harmonie European Day Spa20 70.16%20 80.33%
Hinshaw, Draa & Marsh20 80.16%20 90.33%
Jakes of Saratoga20 90.16%
Bella Saratoga18 100.14%20 100.33%
24 Hour Fitness0.00%30 40.49%
Total City Employment2 12,500 6,129
1 Earliest information available
2State of California - Employment Development Department
Source: City of Saratoga
201020051
CITY OF SARATOGA
FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION
LAST SIX FISCAL YEARS
104
200520062007200820092010
Function
General government12.65 10.75 11.00 13.00 12.00 11.75
Public works20.75 20.75 21.75 22.75 21.75 21.75
Community development14.00 13.00 14.00 14.00 14.00 12.00
Parks and recreation10.35 10.35 10.60 10.60 10.60 9.35
Total57.75 54.85 57.35 60.35 58.35 54.85
Source: City of Saratoga Budget Document
Fiscal Year
10.00
20.00
30.00
40.00
50.00
60.00
70.00
200520062007200820092010
FullTimeEquivalents
Parks&Rec
CommDevelopment
Publicworks
Generalgov't
CITY OF SARATOGA
OPERATING INDICATORS BY FUNCTION
LAST SIX FISCAL YEARS
105
200520062007200820092010
Function
Part 1 crimes1 463 426 425 381 282 173
Total incidents42,011 40,567 39,663 41,243 41,384 39,942
Police reports1,767 1,659 1,767 1,941 1,949 1,273
Public Works
Street resurfacing (miles)N/A5 14 N/A6 3
Street lights repaired2 3 3 12 25 24
Potholes filled (sq. ft.)N/A5,000 5,000 7,000 10,000 10,000
Community Development
Total permit valuation ($000)74,668 94,485 69,935 70,442 61,117 44,658
Parks and Recreation
Classes, trips (enrollment) community events5,604 5,712 4,817 4,782 4,698 4,366
Adult Exercise (e.g. JS Dance. Jazzerxcise)272 312 285 362 515 545
Sports programs (e.g. Adult basketball, softbal 470 473 515 591 459 423
Prescholl programs (enrollment)200 163 159 225 171 161
Day/summer camps (enrollment)301 287 205 242 225 331
Teen/youth council (enrollment)2,506 3,798 2,221 94 419 2,110
Senior center (enrollment/attendance days)22,312 22,591 18,515 17,826 16,325 16,533
1Part 1 Crimes are the following as reported to DOJ: homicide, rape, robbery, burglary, assault, theft,
auto theft, and arson.
Source: City of Saratoga various records
Fiscal Year
CITY OF SARATOGA
CAPITAL ASSET STATISTICS BY FUNCTION
LAST SIX FISCAL YEARS
106
200520062007200820092010
Function
Public safety
Police Station1 1 - - - -
Fire Station
Saratoga Fire District1 1 1 1 1 1
Central Fire District1 1 1 1 1 1
Public Works
Street Miles - Private13 13 13 13 14 14
Street Miles - Public137 137 137 137 140 140
West Valley Sanitation District
Number of Connections8,601 8,621 8,651 8,651 8,683 8,687
Length of Sewer Lines120 120 127 127 127 127
Cupertino Valley Sanitation District
Number of Connections2,118 2,118 2,915 2,927 2,938 2,949
Length of Sewer Lines36 36 36 36 36.5 36.5
Parks and Recreation
Parks Acreage81 81 81 81 84 84
Parks 15 15 15 15 15 15
Source: City of Saratoga various records
Fiscal Year
B-1
APPENDIX B
PROPOSED FORM OF OPINION OF BOND COUNSEL
[Closing Date]
City of Saratoga
Saratoga, California
Re: $11,995,000 City of Saratoga (Santa Clara County, California) General
Obligation Refunding Bonds, Series 2011 (Saratoga Community Library
Project)
Ladies and Gentlemen:
We have acted as bond counsel to the City of Saratoga (the “City”) in connection with the
issuance of its $11,995,000 City of Saratoga (Santa Clara County, California) General Obligation
Refunding Bonds, Series 2011 (Saratoga Community Library Project) (the “Bonds”).
The Bonds are being issued by the City pursuant to Articles 9 and 11 of Chapter 3 of Part
1 of Division 2 of Title 5 of the California Government Code, commencing with Section 53550
of said Code (the “Act”); and a resolution adopted by the City Council of the City (the
“Council”) on June 1, 2011 (the “Bond Resolution”).
In our capacity as bond counsel to the City, we have reviewed: the Resolution; the
Paying Agent Agreement (the “Paying Agent Agreement”), dated as of July 1, 2011, by and
between the City and The Bank of New York Mellon Trust Company, N.A. (the “Paying
Agent”); a tax certificate of the City and a certificate of the original purchaser of the Bonds (the
“Purchaser”), each dated the date hereof (collectively, the “Tax Certificate”); certificates of the
City, the Purchaser and others; the Act and such other documents, opinions and matters to the
extent we deemed necessary to render the opinions set forth herein.
We have assumed the genuineness of all documents and signatures presented to us. We
have not undertaken to verify independently, and have assumed, the accuracy of the factual
matters represented, warranted or certified in the documents. Furthermore, we have assumed
compliance with all covenants and agreements contained in the documents, including (without
limitation) covenants and agreements compliance with which is necessary to assure that future
actions, omissions or events will not cause interest on the Bonds to be included in gross income
for Federal income tax purposes. In addition, we call attention to the fact that the rights and
obligations under the Bonds are subject to bankruptcy, insolvency, reorganization, arrangement,
fraudulent conveyance, moratorium and other similar laws affecting creditors' rights, to the
application of equitable principles, to the exercise of judicial discretion in appropriate cases and
to the limitations on legal remedies against public agencies in the State of California.
B-2
Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we
are of the following opinions:
1. The Bonds constitute the valid and binding obligations of the City.
2. The Council has the power and is obligated to levy property taxes without
limitation as to rate or amount upon all property within the City’s boundaries subject to taxation
by the City (except for certain personal property which is taxable at limited rates) for payment of
the Bonds and interest thereon.
3. Under existing statutes and court decisions and assuming continuing compliance
with certain tax covenants, (i) interest on the Bonds is excluded from gross income for Federal
income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended
(the “Code”); and (ii) interest on the Bonds is not treated as a preference item in calculating the
alternative minimum tax imposed on individuals and corporations under the Code; such interest,
however, is included in the adjusted current earnings of certain corporations for purposes of
calculating the alternative minimum tax on such corporations.
In rendering the opinions in paragraph 3, we have relied upon and assumed (i) the
material accuracy of the representations, statements of intention and reasonable expectations, and
certifications of fact, contained in the Tax Certificate delivered on the date hereof by the City
with respect to the use of proceeds of the Bonds and the investment of certain funds, and other
matters affecting the exclusion of interest on the Bonds from gross income for Federal income
tax purposes under Section 103 of the Code, and (ii) compliance by the City with procedures and
covenants set forth in the Tax Certificate. Under the Code, failure to comply with such
procedures and covenants may cause the interest on the Bonds to be included in gross income for
Federal income tax purposes, retroactive to the date of issuance of the Bonds, irrespective of the
date on which such noncompliance occurs or is ascertained.
4. Under existing statutes, interest on the Bonds is exempt from State of California
personal income taxes.
Except as stated in paragraphs 3 and 4 above, we express no opinion as to any Federal,
state or local tax consequences arising with respect to the Bonds or the ownership or disposition
thereof. Furthermore, we express no opinion as to the effect of any action hereafter taken or not
taken in reliance upon an opinion of counsel other than ourselves on the exclusion from gross
income for Federal income tax purposes of interest with respect to the Bonds, or under state and
local tax law.
B-3
This opinion is issued as of the date hereof, and we assume no obligation to update,
revise or supplement this opinion to reflect any action hereafter taken or not taken, or any facts
or circumstances, or any changes in law or in interpretations thereof, that may hereafter arise or
occur, or for any other reason.
Respectfully submitted,
(THIS PAGE INTENTIONALLY LEFT BLANK)
C-1
APPENDIX C
DTC AND THE BOOK-ENTRY SYSTEM
The information in numbered paragraphs 1-10 of this Appendix C concerning The Depository
Trust Company, New York, New York ("DTC") and DTC's book-entry system, has been furnished by DTC
for use in official statements and the City takes no responsibility for the completeness or accuracy
thereof. The City cannot and does not give any assurances that DTC, DTC Participants or Indirect
Participants will distribute to the Beneficial Owners (a) payments of interest or principal with respect to
the Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest
in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the
registered owner of the Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or
DTC Indirect Participants will act in the manner described in this Appendix. The current "Rules"
applicable to DTC are on file with the Securities and Exchange Commission and the current
"Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC. As used in
this appendix, "Securities" means the Bonds, "Issuer" means the City, and "Agent" means the Paying
Agent.
1. The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for
the securities (the "Securities"). The Securities will be issued as fully-registered securities registered in
the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully-registered Security certificate will be issued for the
Securities, in the aggregate principal amount of such issue, and will be deposited with DTC.
2. DTC, the world's largest securities depository, is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million
issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market
instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC.
DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities
transactions in deposited securities, through electronic computerized book-entry transfers and pledges
between Direct Participants' accounts. This eliminates the need for physical movement of securities
certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned
subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company
for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which
are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the
DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers,
banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship
with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard &
Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities
and Exchange Commission. More information about DTC can be found at www.dtcc.com and
www.dtc.org.
3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which
will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser
of each Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants'
records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial
Owners are, however, expected to receive written confirmations providing details of the transaction, as
C-2
well as periodic statements of their holdings, from the Direct or Indirect Participant through which the
Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be
accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests
in Securities, except in the event that use of the book-entry system for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are
registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be
requested by an authorized representative of DTC. The deposit of Securities with DTC and their
registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records
reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which
may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible
for keeping account of their holdings on behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being
redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in
such issue to be redeemed.
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to
Securities unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under
its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date.
The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus
Proxy).
8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede &
Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice
is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail
information from Issuer or Agent, on payable date in accordance with their respective holdings shown on
DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such Participant and not of DTC, Agent, or
Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment
of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as
may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent,
disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement
of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
9. DTC may discontinue providing its services as depository with respect to the Securities at any time by
giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor
depository is not obtained, Security certificates are required to be printed and delivered.
10. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a
successor securities depository). In that event, Security certificates will be printed and delivered to DTC.
D-1
APPENDIX D
FORM OF CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (this "Disclosure Certificate") is executed and delivered
by the City of Saratoga, California (the "City"), in connection with the issuance by the City of
$11,995,000 aggregate principal amount of its General Obligation Refunding Bonds, Series 2011
(Saratoga Community Library Project) (the "Bonds"). The Bonds are being issued pursuant to the
provisions of Articles 9 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California
Government Code, commencing with Section 53550 of said Code (the "Act") and other applicable laws,
and according to the terms and in the manner set forth in the Paying Agent Agreement between the City
and The Bank of New York Mellon Trust Company, N.A., as paying agent (the "Paying Agent"), dated as
of July 1, 2011 (the "Paying Agent Agreement"), as authorized by the resolution adopted by the City
Council on June 1, 2011 (the "Bond Resolution"). The City has covenanted to comply with its
obligations hereunder and to assume all obligations for continuing disclosure with respect to the Bonds.
The City covenants and agrees as follows:
SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being
executed and delivered by the City for the benefit of the Holders and Beneficial Owners of the Bonds and
in order to assist the Participating Underwriters in complying with Securities and Exchange Commission
Rule 15c2-12(b)(5).
SECTION 2. Definitions. In addition to the definitions set forth in the Paying Agent
Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise
defined in this Section, the following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the City pursuant to, and as
described in, Sections 3 and 4 of this Disclosure Certificate.
"Beneficial Owner" shall mean any person who has or shares the power, directly or indirectly, to
make investment decisions concerning the ownership of any Bonds (including persons holding Bonds
through nominees, depositories or other intermediaries).
"Disclosure Representative" shall mean the Finance and Administrative Services Director or his
or her designee, or such other officer or employee as the City shall designate in writing from time to time.
"Dissemination Agent" shall mean NBS, acting in its capacity as Dissemination Agent hereunder,
or any successor Dissemination Agent, which may be designated in writing by the City and which has
filed with the City a written acceptance of such designation.
"Holder" shall mean the person in whose name any Bond shall be registered.
"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate.
"MSRB" means the Municipal Securities Rulemaking Board established pursuant to Section
15B(b)(1) of the Securities Exchange Act of 1934, as amended.
"Official Statement" shall mean the Official Statement dated June 29, 2011, issued by the City in
connection with the sale of the Bonds.
D-2
"Participating Underwriter" shall mean any of the original purchasers of the Bonds required to
comply with the Rule in connection with offering of the Bonds.
"Repository" means the MSRB or any other information repository as recognized from time to time by
the Securities and Exchange Commission for the purposes referred to in the Rule.
"Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as the same may be amended from time to time.
"State" shall mean the State of California.
SECTION 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later than March 30
of each calendar year, commencing with the report for Fiscal Year 2010-11 (ending June 30,
2011) to be filed by March 30, 2012, provide to the Repository an Annual Report which is
consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report
may be submitted as a single document or as separate documents comprising a package, and may
include by reference other information as provided in Section 4 of this Disclosure Certificate;
provided that the audited financial statements of the City may be submitted separately from the
balance of the Annual Report and later than the date required above for the filing of the Annual
Report if they are not available by that date. If the City's fiscal year changes, it shall give notice
of such change in the same manner as for a Listed Event under Section 5(f).
(b) Not later than fifteen (15) Business Days prior to the date specified in
subsection (a) for providing the Annual Report to the Repository, the City shall provide the
Annual Report to the Dissemination Agent (if the City is not the Dissemination Agent); provided,
however, that the City may distribute the Annual Report to the Repository itself after providing
written notice to the Dissemination Agent. If by such date, the Dissemination Agent has not
received a copy of the Annual Report, the Dissemination Agent shall contact the City to
determine if the City is in compliance with the first sentence of this subsection (b).
(c) If the Dissemination Agent is unable to verify that an Annual Report has been
provided to the Repository by the date required in subsection (a), the Dissemination Agent shall
send a notice to the Repository, substantially the form attached hereto as Exhibit A.
(d) The Dissemination Agent shall, to the extent the City has provided the Annual
Report to the Dissemination Agent, file a report with the City (if the Dissemination Agent is not
the City) certifying that the Annual Report has been provided pursuant to this Disclosure
Certificate, stating the date it was provided.
SECTION 4. Content of Annual Reports. The City's Annual Report shall contain or include by
reference the following:
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(a) The audited financial statements of the City for the prior fiscal year, prepared in
accordance with generally accepted accounting principles as promulgated to apply to governmental
entities from time to time by the Governmental Accounting Standards Board. If the City's audited
financial statements are not available by the time the Annual Report is required to be filed pursuant to
Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the
financial statements contained in the Official Statement, and the audited financial statements shall be filed
in the same manner as the Annual Report when they become available.
(b) Unless otherwise provided in the audited financial statements, operating data
with respect to the City for preceding fiscal year, substantially similar to that provided in Table 1 in the
official statement for the Bonds describing assessed valuations.
(c) In addition to any of the information expressly required to be provided under
paragraphs (a) and (b) of this Section, the City shall provide such further information, if any, as may be
necessary to make the specifically required statements, in the light of the circumstances under which they
are made, not misleading.
Any or all of the items listed above may be included by specific reference to other documents,
including official statements of debt issues of the City or related public entities, which have been
submitted to the Repository or the Securities and Exchange Commission. If the document included by
reference is a final official statement, it must be available from the MSRB. The City shall clearly identify
each such other document so included by reference.
SECTION 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be
given, notice of the occurrence of any of the following events with respect to the Bonds:
(1) Principal and interest payment delinquencies;
(2) Nonpayment related defaults, if material;
(3) Unscheduled draws on any debt service reserves reflecting financial difficulties;
(4) Unscheduled draws on credit enhancements reflecting financial difficulties;
(5) Substitution of credit or liquidity providers or their failure to perform;
(6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed
or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-
TEB) or other material notices or determinations with respect to the tax status of
the Bonds, or other material events affecting the tax status of the Bonds;
(7) Modifications to the rights of Bondholders, if material;
(8) Bond calls, if material, and tender offers;
(9) Defeasances;
(10) Release, substitution, or sale of property securing repayment of the Bonds, if
material;
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(11) Rating changes;
(12) Bankruptcy, insolvency, receivership or similar event of the obligated person;
(13) Consummation of a merger, consolidation or acquisition involving an obligated
person of the sale of all or substantially all of the assets of the obligated person,
other than in the ordinary course of busienss, the entry into a definitive
agreement to undertake such an action or the termination of a definitive
agreement relating to any such actions, other than pursuant to its terms, if
material; and
(14) Appointment of a successor or additional paying agent or the change of name of
a paying agent.
(b) The Dissemination Agent (if the City is not the Dissemination Agent) shall,
promptly upon obtaining actual knowledge of the occurrence of any of the Listed Events, contact
the Disclosure Representative, inform such person of the event, and request that the City
promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to
subsection (f); provided, that failure by the Dissemination Agent to so notify the Disclosure
Representative and make such request shall not relieve the City of its duty to report Listed Events
as required by this Section 5.
(c) Whenever the City obtains knowledge of the occurrence of a Listed Event, the
City shall, in a timely manner not in excess of ten business days after the occurrence of the Listed
Event, file or cause to be filed a notice of such occurrence, if required, with the MSRB in
electronic format, accompanied by such identifying information as is prescribed by the MSRB.
(d) If the Dissemination Agent has been instructed by the City to report the
occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with
the Repository. Notwithstanding the foregoing, notice of Listed Events described in subsections
(a)(4) and (5) need not be given under this subsection any earlier than the notice (if any) of the
underlying event is given to Holders of affected Bonds pursuant to the Paying Agent Agreement.
(e) The Dissemination Agent may conclusively rely on an opinion of counsel that the
City's instructions to the Dissemination Agent under this Section 5 comply with the requirements
of the Rule.
SECTION 6. Termination of Reporting Obligation. The City's obligations under this
Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all
of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give
notice of such termination in the same manner as for a Listed Event under Section 5(f).
SECTION 7. Dissemination Agent. The City may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may
discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.
The Dissemination Agent shall not be responsible in any manner for the content of any notice or report
prepared by the City pursuant to this Disclosure Certificate. If at any time there is not any other
designated Dissemination Agent, the City shall be the Dissemination Agent. The initial Dissemination
Agent shall be the City.
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SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the City may amend this Disclosure Certificate (and if the City is not the Dissemination
Agent, the Dissemination Agent shall agree to any amendment so requested by the City provided such
amendment does not impose any greater duties, nor risk of liability, on the Dissemination Agent), and any
provision of this Disclosure Certificate may be waived, provided that the following conditions are
satisfied:
(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or 5(a), it
may only be made in connection with a change in circumstances that arises from a change in legal
requirements, change in law, or change in the identity, nature or status of an obligated person
with respect to the Bonds, or the type of business conducted;
(b) The undertaking, as amended or taking into account such waiver, would, in the
opinion of nationally recognized bond counsel, have complied with the requirements of the Rule
at the time of the original issuance of the Bonds, after taking into account any amendments or
interpretations of the Rule, as well as any change in circumstances; and
(c) The amendment or waiver either: (i) is approved by the Holders of the Bonds in
the same manner as provided in the Paying Agent Agreement for amendments to the Paying
Agent Agreement with the consent of Holders, or (ii) does not, in the opinion of the Trustee or
nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial
Owners of the Bonds.
In the event of any amendment or waiver of a provision of this Disclosure Certificate, the City
shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative
explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a
change of accounting principles, on the presentation) of financial information or operating data being
presented by the City. In addition, if the amendment relates to the accounting principles to be followed in
preparing financial statements: (i) notice of such change shall be given in the same manner as for a Listed
Event under Section 5(f), and (ii) the Annual Report for the year in which the change is made should
present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial
statements as prepared on the basis of the new accounting principles and those prepared on the basis of
the former accounting principles.
SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed
to prevent the City from disseminating any other information, using the means of dissemination set forth
in this Disclosure Certificate or any other means of communication, or including any other information in
any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this
Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of
occurrence of a Listed Event in addition to that which is specifically required by this Disclosure
Certificate, the City shall have no obligation under this Disclosure Certificate to update such information
or include it in any future Annual Report or notice of occurrence of a Listed Event.
SECTION 10. Electronic Filing. The City may satisfy its disclosure obligations hereunder to file
any notice, document or information by filing the same with the MSRB through its Electronic Municipal
Market Access system, in the format and with identifying or other information as may be required by the
Securities and Exchange Commission and the MSRB, or any other Repository that may be recognized by
the Securities and Exchange Commission, and in such manner as may be specified by the Securities and
Exchange Commission and such Repository.
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SECTION 11. Default. In the event of a failure of the City or the Dissemination Agent (if the
City is not the Dissemination Agent) to comply with any provision of this Disclosure Certificate, any
Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate,
including seeking mandate or specific performance by court order, to cause the City or the Dissemination
Agent, as the case may be, to comply with its obligations under this Disclosure Certificate. A default
under this Disclosure Certificate shall not be deemed an Event of Default under the Paying Agent
Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the City
and the Dissemination Agent to comply with this Disclosure Certificate shall be an action to compel
performance.
SECTION 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination
Agent (if the City is not the Dissemination Agent) shall have only such duties as are specifically set forth
in this Disclosure Certificate, and the City, to the extent permitted by law, agrees to indemnify and save
the Dissemination Agent, their officers, directors, employees and agents, harmless against any loss,
expense and liabilities which it may incur arising out of or in the exercise or performance of its powers
and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any
claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful
misconduct. The obligations of the City under this Section shall survive resignation or removal of the
Dissemination Agent and the payment of the Bonds.
SECTION 13. Notices. Any notices or communications to or among any of the parties to this
Disclosure Certificate may be given as follows:
To the City: City of Saratoga
13777 Fruitvale Avenue
Saratoga, California 95070
Attention: Finance & Administrative Services Director
To the Dissemination NBS
Agent: San Francisco Office
870 Market Street, Suite 1223
San Francisco, CA 94102
Phone: 800.434.8349
Facsimile: 415.391.8439
Any person may, by written notice to the other persons listed above, designate a different address
or telephone number(s) to which subsequent notices or communications should be sent.
SECTION 14. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the
City, the Dissemination Agent, the Participating Underwriters and Holders and Beneficial Owners from
time to time of the Bonds, and shall create no rights in any other person or entity.
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SECTION 15. Counterparts. This Disclosure Certificate may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the same
instrument.
Date: ________, 2011
CITY OF SARATOGA
By
Authorized Officer
NBS,
as Dissemination Agent
By
Authorized Officer
[Signature Page to the Continuing Disclosure Certificate]
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EXHIBIT A
FORM OF NOTICE TO REPOSITORY OF FAILURE TO FILE ANNUAL REPORT
Name of City: City of Saratoga
Name of Issue: $11,995,000 City of Saratoga (Santa Clara County, California)
General Obligation Refunding Bonds Series 2011 (Saratoga Community Library
Project)
Date of Issuance: __________, 2011
NOTICE IS HEREBY GIVEN that the City of Saratoga (the "City") has not provided an Annual
Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure
Certificate dated as of _________, 2011. The City anticipates that the Annual Report will be filed by
_____________.
Dated:_______________
CITY OF SARATOGA
By [form only; no signature required]