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ACFR - Fiscal Year 2001 02 (PDF)
COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2002 Olt 1956 City of Saratoga, California RC-rveAv 7v kDx.-1 SPcS CITY OF SARATOGA, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2002 Prepared By: ADMINISTRATIVE SERVICES DEPARTMENT City of Saratoga Comprehensive Annual Financial Report For the year ended June 30, 2002 Table of Contents Pale IntroductoKy Section Tableof Contents......................................................................................................................................i Letterof Transmittal.............................................................................................................................. v GFOA Certificate of Achievement for Excellence in Financial Reporting.....................................ix CSMFO Certificate of Award in Outstanding Financial Reporting.................................................x Principal Officials of the City .......................................................................................................... ....xi Organization Chart............................................................................ .. xii Financial Section IndependentAuditors' Report ............................................................................................................I Management's Discussion and Analysis...........................................................................................3 Basic Financial Statements: Government-Wide Financial Statements ..................................................................................15 Statementof Net Assets.............................................................................................................17 Statement of Activities and Changes in Net Assets ................. Fund Financial Statements...........................................................................................................21 Governmental ]Funds: Balance Sheet.................... 2 Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Assets .....................................................27 Statement of Revenues, Expenditures and Changes in Fund Balances..........................28 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Government-Wide Statement of Activities and Changes inNet Assets ......................................................................................................................30 Fiduciary Funds: Statement of Fiduciary Net Assets.......................................................................................32 i City of Saratoga Comprehensive Annual Financial Report For the year ended June 30, 2002 Table of Contents, Continued Pale Financial Section, Continued Index to Notes to the Basis Financial Statements....................................................................33 Notes to the Basis Financial Statements....................................................................................35 Required Supplementary Information......................................................................................61 BudgetaryInformation.............................................................................................................62 Modified Approach for City Streets Infrastructure Capital Assets ...................................66 Defined Pension Plan................................................................................................................69 Supplementary Information: Non-major Governmental Funds.......................................................................................... ....73 CombiningBalance Sheet................................................................................................ ........74 Combining Statement of Revenues, Expenditures and Changes in Fund Balances .......76 Capital Assets Used in the Operation of Governmental Funds............................................79 Scheduleby Source ................................................................................................. .....81 ............. Schedule by Function and Activity.........................................................................................82 Schedule of Changes by Function and Activity...................................... „84 Statistical Section Unaudited Government-Wide Information: Government-Wide Expenses by Function ....................................................................................86 Government-Wide Revenues........................................................................... Fund Information: General Fund Expenditures - By Function-Last Ten Fiscal Years .............................. ...88 General Fund Revenues-By Source- Last Ten Fiscal Years....................................................89 Property Tax Levies and Collections-Last Ten Fiscal Years ................ ..90 General Fund Tax Revenue -Last Ten Fiscal Years....................................................................91 Assessed and Estimated Actual Value of Taxable Property - LastTen Fiscal Years....................................................................... ............92 ............................... Property Tax Rates (Per$100 of Assessed Valuation) - All Overlapping Governments - Last Ten Fiscal Years......................................... ii City of Saratoga Comprehensive Annual Financial Report For the year ended June 30, 2002 Table of Contents, Continued Pale Statistical Section (UYiaudited), Continued Fund Information, Continued: Special Assessment Billings and Collections -Last Ten Fiscal Years.......................................94 Ratio of General Obligations Bonded Debt to Assessed Value and Bonded Debt Per Capita-Last Ten Fiscal Years...................................................................95 Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Fund Expenditures -Last Ten Fiscal Years...................................................96 Demographic Statistics-Last Ten Fiscal Years.............................................................................97 Property Values, Remodeling and Construction -Last Ten Fiscal Years................................98 Computationof Legal Debt Margin...............................................................................................99 Computation of Direct and Overlapping Debt ..........................................................................100 PrincipalTaxpayers........................................................................................................................101 Miscellaneous Statistics..................................................................................................................102 Imo . fir+ 4 I e iv CD r _;z 2. October 28,2002 To the Honorable Mayor and City Council City of Saratoga Saratoga, CA 95070 The Comprehensive Annual Financial Report (CAFR) of the City of Saratoga for the year ended June 30, 2002, 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. To the best of our knowledge and belief, the enclosed data are accurate in all material respects and are reported in a manner that presents fairly the financial position and results of operations of the various funds, account groups and component units of the City of Saratoga. All disclosures necessary to enable the reader to gain an understanding of the City of Saratoga's activities have been included. The CAFR is presented in the following three sections: 1. Introductory Section - The introductory section, which is unaudited, includes this letter of transmittal., a list of the City of Saratoga's elected officials and administrative personnel, an organization chart, the Government Finance Officers Association's (GFOA's) of the United States Certificate of Achievement for Excellence in Financial Reporting and the California Society of Municipal Finance Officer's (CSMF0) Certificate of Award for Financial Reporting,to the City of Saratoga for its CAFR for the fiscal year ending June 30, 2001. 2. Financial Section - The basic financial statements include management's discussion and analysis, government-wide financial statements, fund financial statements, notes to the basic financial statements, and required supplementary inforination as well as the auditors' report on the financial statements and schedules. 3. Statistical Section - Includes selected financial and demographic information, which is generally presented on a multi-year basis and is unaudited. REPORTING ENTITY The financial reporting entity(the City) includes all the fund activity of the primary goverrunent, as well as all of its component units. Component units are legally separated entities forrwluich the City is fully accountable. V 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 District#1 and the agency cash flows and cash balances of the Saratoga Public Finance Authority are reported in the City's financial statements. GOVERNMENTAL STRUCTURE AND RELATED INFORMATION 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 30,444 as reported by the State of California Department of Finance. The City is a general law city of the State of California and operates under a council-manager form of government. Policyrnaking 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. The City supports privatization and has supplemented its work force 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. 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 Finance Commission, Heritage Preservation Commission, Library Commission, Parks and Recreation Commission, Planning Commission, Public Safety Commission, and Arts and Youth Commission. ECONOMIC CONDITIONS AND OUTLOOK Within a close proximity to many businesses associated with the high technology industry, Saratoga. is viewed as a desirable place to live and serves primarily as a residential community to the Silicon Valley. There is limited commercial or industrial activity occurring within the City's boundaries. Due to the community's residential character, the main measure of the City's economic condition is based on the stability of property taxes, motor vehicle license fees, sales tax, franchise fees, as well as the fluctuations in service charges which affects development taxes,permits and fees. Although the local recession provided ample signs of a slowdown, Saratoga's sustained economy Vi drove-up assessed. valuations of real property by 17.61% from 2001 to 2002. In addition, the City's 2001 passing of the Library General Obligation Bond allowed the City to realize additional tax equity allocation (TEA) revenues as a result of a special legislation signed by California's Governor. SB 1883, which was approved in 2000, restored the eligibility of(four) cities in Santa Clara County to receive TEA funds subsequent to a vote of the people reinstating, increasing or imposing a new tax. In addition, the City's surplus from the "good times" enabled the City to dedicate reserves to long-term capital projects and to make, major service improvements such as the new 5-year capital improvement program (CIP) budget ($13 million), improvements to Congress Springs Park, pavement management program ($1.2 million), and increased traffic patrols. On the other hand, the tragic events of September I I1h, corporate layoffs and accounting scandals also proved to adversely affect the economy resulting in an 11% decline of sales tax revenues from the previous year and a significant decline of development revenues and other taxes such as transfer, construction, and transient occupancy by as much as 50%. Fortunately the City had other revenues and receipts from one-time projects to assist in the offset of this decline. Saratoga continues to support policies and practices intended to maintain the City's financial integrity. For example, a minimum $2.3 million General Fund operating reserve is maintained and a S200,000 contingency appropriation; as well as a $1.5 million economic uncertainty reserve. The budget is built upon a conservative set of assumptions for annual revenues and does not assume that any potential one-time revenue sources will materialize if not yet committed or guaranteed to the City. 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 are compiled. to allow for the preparation of financial statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed benefits likely to be derived, and (2) the valuation of costs and benefits requires estimates and judgments by management. As a recipient of' federal, state and local financial assistance, the City is also responsible for guaranteeing that an adequate internal control structure is in place to ensure and document compliance with applicable laws and regulations related to these programs. This internal. control stricture is subject to periodic evaluation by the City's management. 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 finds 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 fund level. The City also maintains an encumbrance accounting system as another vii method of maintaining budgetary control. Encumbered amounts of the operating budget lapse at year-end. However, outstanding encumbrances of a material nature are typically reappropriated as part of the following year's budget. 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 Offce'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. Caporicci &Larson, CPA's, performed the City's fiscal year 2001- 2002 audit. Awards. The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for the CAFR for the fiscal year ended June 30, 2001. In order to be awarded a Certificate of Achievement, the City published an easily readable and efficiently organized financial report. This report satisfied both generally accepted accounting principles and applicable legal requirements. The Certificate of Achievement is valid for a period of one year. We believe our current CAFR continues to meet the Certificate of Achievement program's requirements, and plan on submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgements. This CAFR represents the cuhnination of numerous hours of hard work expended by many individuals in the Accounting Division of the Administrative Services Department. In particular, we would like to express our appreciation to Vivian Gong, Accounting Supervisor and our staff members Jaye Tkach, Julie Ingraham, Karen Caselli, and Joyce Lan. Furthermore, we would like to thank Caporicci & Larson, CPA's for their helpful and timely assistance in the preparation of this report. Finally,we would like to give credit to the City Council and the Finance Advisory Commission for their ongoing interest and support in planning, conducting and advising on the operations of the City in a responsible and progressive manner. Respectfully submitted, Dave Anderson Jesse Baloca City Manager Administrative Services Director viii Certificate of Achievement for Excellence in Financial Reporting Presented to City of Saratoga, California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2001 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. TW CE �fFj� W UYTIEl1 STATES y Awr A� N oo TM Pr sident 7� SFIb , ahc.ca Y26� Executive Director ix :i C ti R r 0 4 o o� tc t3 =4 Zj o ;.4 z U � o �� � L;Jt1:1 N a a a FFyy � U b y U 0 1 X CITY OF SARATOGA ELECTED OFFICIALS AND °>DMI1,rISTRATIVE PERSONNEL As of DUNE 30, 2002 CITY COUNCIL Nick Streit—Mayor Evan Baker— Vice Mayor Stan Bogosian John Mehaffey Ann Waltonsmith CITY STAFF Dave Anderson—City Manager Lone Tinfow—Assistant City.Manager Cathleen Boyer— City Clerk Jesse Baloca— Administrative Services Director Tom Sullivan— Community Development Director John Cherbone— Public Works Director Joan Pisani--Recreation Director CITY ATTORNEY Richard S. Taylor-- Shute, Mihaly & Weinberger INDEPENDENCE AUDITOR Caporicci & Larson xi �o - § � 2 �k /ul } 2 - 76 - 2rL � ci ) a §h ) %$ a - � � ® . � ¥ ® e (n �3 k \ \ ® a ƒ2 $ \ 7k & � e, 2 = 2 ° « g / k § �� � § k �S 0 k � ° k 0cl } « $ § §/ o .76 § � « � fu f\ to � } §2 E ^ f � \ !» 0 � � S 2k f$ uj � _ ) mi o ƒ o ; S d k k $ 0-u � e a- g ,■ 20 j CD - 9 �§ o ) I \m nr , o E ° ¥ § cl cl k � fn L � 2 k L � k $ ) \ m / Q 2 ��� cn 2 2 C ° ] o � / ( " ` E-2 0 c &o c - 76 k C on 032 } > % m . E - 2 § _ - - _ \ m 2 2\ ° � :2 U E 2 ` j § { ~ ur / / % d �} ) % 2 ;w }U �¥ /�� 76k/ � \/ �� ■ ] 0 0 / }/ } ƒ$ m � {)§ 27 ] & = G oll 2 ƒ ] .2� / � k2 9 C > \ k � = .w - oa] -T- e - ° e J � L Ms q u 0E E § � �j 7 / § i Offices located in. C&L Bay Area Caporicci&Larson Orange County Certified Public Accountants Sacrarnento INDEPENDENT AUDITORS' REPORT The 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 the City of Saratoga, California (City'), as of and for the year ended June 30, 2002, 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 an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in the United States and the standards applicable to financial audits contained in Government 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 basic financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the City as of June 30, 2002, and the respective changes in financial position for the year then ended in conformity with generally accepted accounting principles in the United States. As discussed in Note 1 to the basic financial statements, the City adopted Statements of the Governmental Accounting Standards Board No. 34, Basic Financial Statements --and Management's Discussion aml Analysis -for State and Local Governments; No. 37, Basic Financial Statements - and Management's Discussion and Analilsis -- for State and local Governments: Omnibus; and, No. 38, Certain Financial Statement Note Disclostires. In accordance with Government Auditing Standards, we have also issued our report dated. October 4, 2002 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 grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should. be read in conjunction with this report in considering the results of our audit. Toll Free Tel:(8-7)862-2200 Toll Free Fax:(866)436-0927 Bay Area Orange County Sacrarnento 1300 Clay Street,Suite 600 3184-D Airway Avenue 777 Campus Commons Rai.,Suite 200 Oakland,Califomi:a 946 H Costa Mesa,California 92626 Sacramento,California 95825 The Honorable Mayor and Members of the City Council of the City of Saratoga Saratoga, California The accompanying Required Supplementary Information, such as management's discussion and analysis, budgetary comparison information and other information as listed in the table of contents are not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquires 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 accompanying supplementary information is presented for purpose of additional analysis and is not a required part of the basic financial statements. The supplementary information has been subjected to the auditing procedures applied in the audit of the basic financial statements taken as a whole. The introductory section and statistical tables 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. em Oakland, California October 4, 2002 z MANAGEMENT'S DISCUSSION AND ANALYSIS The City of Saratoga provides this Management Discussion and Analysis, a new format prescribed by the provisions of Government Accounting Standards Board Statement 34 (GASB 34). This narrative overview and analysis of the City of Saratoga's financial activities is for the fiscal year ended June 30, 2002. Please consider this information in conjunction with the accompanying Transmittal Letter and Basic Financial Statements. FINANCIAL HIGHLIGHTS During economic recessed conditions, the City experienced a mix of major revenues that continued to show slight growth and was fortunate to offset the downturn in volatile development and retail related revenue streams. Financial highlights of the year include the following: • The City's net assets increased by over$1.2 million or 1.0% over the prior year. The City does riot have any business-type assets. • The results of activities produced an increase to nets assets by$12 million in fiscal year 2002 and $4.5 million in fiscal year 2001. Although both fiscal years favored an increase to net assets, the net results from activities decreased by $3.2 million or 72.4% from fiscal year 2001 to 2002. • Fiscal year 2002 revenues showed very little change, decreasing slightly by only $4 thousand or .02% from 2001. Change in 2002 revenue activity from 2001 was the result of offsetting activity that reflects the following major highlights: c $2.3 million in one-time capital grants received in 2001 and not in 2002 where $2.1 supports the funding of the City's Gateway capital. improvement project; o The increase of property taxes of approximately S 1.8 million primarily reflects a 17.61% growth in assessed valuations from 2001 to 2002, additional Tax Equity Allocation revenues as a result of a special legislation from passing of 2001 voter approved Library General Obligation Bonds, and property tax proceeds to be used for the new Library General Obligation Bonds debt service payments; and the o Decline of sales tax, local taxes, and interest earnings by more than $0.8 million. • The cost of all City programs increased by S3.2 million or 22.9%, and was largely supported by the increase in revenues that support program expenses. Changes to City program expenses reflect the following major highlights: o $375 thousand increase to general and intergovernmental services; o $500 thousand increase for public safety services that primarily reflects increases to police and animal control. services; o $800 thousand increase for public works services such as streets and roads that were offset by pavement management giant funding; 3 o 5779 thousand increase in debt service interest reflects the final payment of the City's 1976 Library General Obligation Bond and payment on the City's new 2001 Library General Obligation Bond, which is supported by the increase in voter approved property tax revenues; o $470 thousand for recreation and other community services where the direct costs are primarily supported by the increase in fees that reflect greater community participation levels; and o $294 thousand recognized as an expense for depreciation. The General Fund(the primary operating fund) reflected on a current financial resource basis, reports a decrease in fund balance by $5.5 million or 44.2% that primarily reflects the dedication of surplus reserves to the City's new 5-year Capital Improvement Program (CIP). FINANCIAL STATEMENTS This discussion and analysis are intended to serve as an introduction to the City of Saratoga's basic financial statements. The City's basic financial statements include three components: 1) Government-Wide Financial Statements, 2) Fund Financial Statements, and 3) Notes to the Basic Financial Statements. This report also contains additional required supplementary information (budgetary schedules) and other supplementary information (combining financial statement) in addition to the basic financial statements themselves. These components are described below: Basic Financial Statements The Government-Wide Financial Statements present the financial picture of the City from the economic resources measurement focus using the accrual basis of accounting. They typically present governmental activities. These statements include all assets of the City(including infrastructure) as well as all liabilities (including long-term debt). Additionally, certain eliminations have occurred as prescribed by the statement in regards to interfund activity, payables and receivables. The Fund Financial Statements include statements for two categories of activities— governmental and fiduciary. The governmental activities are prepared using the current financial resources measurement focus and modified accrual basis of accounting. The fiduciary activities are agency funds, which only report a balance sheet and do not have a measurement focus. Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided to explain the differences created by the integrated approach. Government-Wide Financial Statements The Statement of Net Assets and the Statement of Activities and Changes in Net Assets report information about the City as a whole and about its activities. These statements include all assets and liabilities of the City using the accrual basis of accounting,which is similar to the accounting used by most private-sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. 4 These two statements report the City's net assets and changes in them. Net assets are the difference between assets and liabilities, which is one way to measure the City's financial health, or financial position. Over time, increases or decreases in the City's net assets are one indicator of whether its financial health is improving or deteriorating,. Other factors to consider are changes in the City's property tax base and the condition of the City's roads. Governmental activities report most of the City's basis service activities that include general government services, law enforcement,public works and parks, recreation services, and community development services. Property and sales tax, franchise fees, user fees and licenses, state and federal grants, and interest income finance these activities. Fund Financial Statements The Fund financial statements provide detailed information about the major funds— not the City as a whole. Some funds are required to be established by State law and by bond covenants. However, management establishes many other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money. Governmental Funds consist of most of the City's basic services, which focuses on how rnoney flows into and out of those fiends and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the City's general government operations and the basic services it provides. Governmental fiend information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the City's programs. The differences of results in the Governmental fund financial statements to those in the Government-wide financial statements are explained in a reconciliation schedule following each Governmental Fund financial statement. Fiduciary Funds involves the City's role as a trustee or fiduciary for certain funds held on behalf of other organizations or districts. These funds are used to account for assets held by the City and are purely custodial in nature, where assets equal liabilities therefore, related results of operations are not measured or reported. These activities are excluded from the City's other financial statements because the City cannot use these assets to finance its own operations. Ln addition, the City i.s responsible for ensuring that the assets reported in these funds are used for their intended purpose. Notes to the Basic Financial Statements provide additional information that is essential to a full understanding of the data provided in the government-wide and the fund financial statements. The notes can be found immediately following the fund financial statements. Required Supplen ientary Information follows the basic financial statements and includes a budgetary comparison schedule that includes a reconciliation between the statutory fund balance for budgetary purposes and the fund balance for the General Fund as presented in the governmental fiend financial statements. 5 GOVEILNMENT-WIDE FINANCIAL ANALYSIS As mentioned earlier,the City of Saratoga has prepared the fiscal year ended June 30, 2002 financials in a new format prescribed by the provisions of Government Accounting Standards Board Statement 34 (GASB 34). Therefore, for this government-wide financial analysis and for comparative purposes, the City is presenting the fiscal year 2001 in a similar format. Statement of Net Assets The City's Net Assets comparing 2002 to 2001 is as follows: Statement of Net Assets (in Thousands) Governmental Activities 2002 2001 Current Assets $ 29,659 $ 34,281 Capital Assets 106,105 99,666 Total Assets 135,764 133,947 Current Liabilities 2,098 1,645 Long-term Debt 15,085 15,090 Total Liabilities 17,183 16,735 Net Assets: Invested in Capital Assets, net of debt 91,105 84,566 Restricted 18,435 18,394 Unrestricted 9,041 14,387 Total Net Assets $ 118,581 $ 117,347 The City's net assets total$118.6 million at the end of 2002, compared to $117.3 million in 2001, The largest portion of the City's net assets $91.1 million. or 76.8% reflects its investments in capital assets such as land, buildings, equipment and infrastructure (roads, bridges, and other immovable assets), less any related debt used to acquire those assets that is still outstanding. The assets are used to provide services to residents; consequentially, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The portion of the City's restricted net assets, S18.4 million or 15.5%, represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets, $9 million, may be used to meet the City's ongoing obligations to residents and creditors. Internally imposed designations of resources are not presented as restricted net assets. 6 Statement of Changes in Net Assets The City's Change in Net Assets for fiscal years ended June 30, 2002 and 2001 is as follows: Changes in Net Assets (in Thousands) Governmental Activities 2002 2001 Program Revenues: Charges for services $ 5,972 $ 5,576 Operating grants and contributions 1,902 1,773 Capital grants and contributions - 2,300 Total Program Revenues 7,874 9,649 General Revenues: Property taxes 4,044 2,171 Sales taxes 1,067 1,349 Franch se taxes 1,011 877 Local taxes 1,177 1,478 Motor vehicle in-lieu fees 1,808 1,756 Investment earnings 879 1,132 Miscellaneous 754 206 Total General Revenues 10,740 8,969 Total Revenues 18,614 18,618 Expenses: General and intergovernmental services 2,005 1,630 Public safety 3,653 3,157 Environmental services 650 724 Public works 4,477 3,678 Community services 2,121 1,651 Community development services 2,026 1,923 Interest on long-term debt 920 141 Depreciation expenses 1,529 1,235 Total expenses 17,381 14,139 Increase (decrease) in net assets $ 1,233 $ 4,479 As mentioned earlier, the City's net assets increased by $1.2 million or 0.9% over the prior year. Most of the City's general service programs are supported by General Revenues that represent $10.7 million or 57.7% of total citywide revenues. The increase of property taxes of approximately $1.3 million primarily reflects a 17.61% growth in assessed valuations from 2001 to 2002, additional Tax Equity Allocation revenues as a result of a special legislation from passing of 2001 voter approved Library General Obligation Bonds, and property tax proceeds to be used for the new Library General Obligation Bonds debt service payments. 7 Charges for service revenues represent 32.1% of total revenues and is used to support programs related to intergovernmental indirect services,public safety, environmental services, public works,recreation and community services, and community development services. The total cost of all City programs totals $17.4 million and is an increase of$3.2 million or 22.9%. The increase in debt service interest reflects the final payment of the City's 1976 Library General Obligation Bond and payment on the City's new 2001 Library General Obligation Bond. The following chart represents the distribution of all City programs expenses: Envir. Interest Public Works 4% 5% Deprec. 25% ;tii:... 9% Gen 12% Public Safety Comm Dev 21% Comm Svc 12°0 12% GENERAL FUND BUDGETARY HIGHLIGHTS Changes from the City's original budget to the final budget is detailed in the Required Supplementary Information Section along with a comparison to actual activity for the year ended June 30, 2002. A highlight of significant changes from the City's original budget to the final budget is summarized as follows: Revenues During the City's mid-year review process, revenue projections were revised to reflect: • A conservative 15% decline in retail activity and sales tax revenues; • Reduction in transfer tax by 30% and transient occupancy tax by 44% to and an increase in construction tax by 49%to reflect a specific housing development project: • An increase in youth sports donations to support park projects and improvements. Expenses and Transfers During the City's fiscal year, amendments to the original budget were revised to primarily reflect: • $5.3 million operating transfers undesignated reserves to the City's new 5-year Capital Improvement Program for projects relating to public safety, infrastructure, facilities, and parks and trails; • Re-appropriation of encumbrances outstanding from the year ended June 30, 2001 to July 1, 2002 for approximately $375k; 8 • Amendment to the Law Enforcement contract for an additional six months of traffic patrol officer support; • $25k for a consultant to assist with projects related to financial reporting and record keeping; and • $125k for park upgrades, community center remodeling, and a civic center master plan. CAPITAL ASSETS As of June 30, 2002, the City had $106.1 million invested in a variety of capital assets, as reflected in the following schedule, which represents an increase of$6.4 million or 6.5')" above the prior year. Capital Assets at Year-end (Net of Depreciation - In Thousands) Governmental Activities 2002 2001 Land $ 4,831 $ 4,831 Buildings and Structures 3,088 3,209 Machinery and Equipment 791 665 Infrastructure 88,407 89,558 Construction in Progress 8,988 1,403 Total $ 106,105 $ 99,666 The following reconciliation summarizes the change in Capital Assets, which primarily reflects the addition of Construction in Progress for the new Library Expansion Project and the beginning phases for various Public Works Capital Improvement Projects (CIP's) as part of the City's new multiple-year 5-year CIP budget program and the inclusion of depreciation. Changes in Capital Assets (In Thousands) Governmental Activities 2002 2001 Beginning Balance S 99,666 $ 10,384 Additions: CIP 7,585 - Infrastructure g 98,820 Machinerery and Equipment .379 - Retirements: inventory Adjustments (1,073) (913) Depreciation (461) 8,625 Ending Balance $ 106,105 $ 99,666 CASH MANAGEMENT To 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. DEBT ADMINISTRATION Oustanding Debt, at year-end (In Thousands) Governmental Activities 2002 2001 1976 General Obligation Bond $ - $ 100 2001 General Obligation Bond 15,000 15,000 Claims Payable 50 50 Compensated Absences 316 132 Total $ 15,366 $ 15,282 The current portions of long-term debt (S281 thousand and $19 thousand for 2002 and 2001, respectively) are classified as current liabilities in the City's Statement of Net Assets. During the year, the City made final payment of$100,000 towards a 1976 general obligation bond, which was payable from lease revenues received from the County of Santa Clara for the Saratoga Library. In March 2000,residents of Saratoga approved an increase in their property tax rate to pay for the debt service payments on new Library General Obligation Bonds in the amount of$15 million for a new Library Expansion Project. The Library bonds were issued in May 2001, and the first debt service payment (interest only) began February 2002. The change in compensated absences primarily reflects the way that annual leave is recognized to a more conservative approach. Further information on the City's outstanding debt can be found in the notes to the financial statements. ECONOMIC OUTLOOK AND MAJOR INITIATIVES During the difficult economic times for the Bay Area/Silicon Valley region of Northern California, the City's finances remain stable in its ability to maintain existing operations with current revenues. As of the end of the year, signs of recovery are anticipated but growth remains questionable. The City's primary focus for the new fiscal year is on its need to exercise caution and on maintaining operational balance. 10 Property tax revenues continue to increase along with assessed valuations that have increased.by 3.47% for Saratoga and 5.52% for all of Santa Clara County but not to the extent of prior dot.com boom years. The 2000-2001 fiscal year began with an assessed valuation growth of 17.611.% for Saratoga and 15.56% for Santa Clara County. AIthough low interest rates may spur homeowners to refinancing, temporarily boosting retail sales, we anticipate that the Bay Area unemployment rate, which continues to be higher than the national average, may counter any return of the 1 l%decline in sales tax revenues experience this last fiscal year. Even though Cities have been fortunately spared to-date from the loss of State finding from motor-vehicle license fee revenues, the potential threat of a future loss remains unknown till after January 1, 2003. Major initiatives for the fiscal year 2002-2003 is as follows: • Maintain preparedness for future economic and City operational threats by closely continuing to monitor current revenues and expenditures and by maintaining General Fund Reserves in the amount of 51.5 million for economic uncertainty and $2.3 million for operations; • Preserve the commitment of capital improvement reserves for projects related to public safety, infrastructure, parks and trails, and facilities; and • Utilize existing reserves to acquire a new North Campus property for the expansion of City services. 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. u Y x ���ti�sz�'��� �, .,., _ t;?, fr`' r -- ,ti,, z(� � I ,�;. i,�� ti _ �z_�' �_�' _- City of Saratoga Statement of Net Assets June 30, 2002 Primary _Government Governmental Activities ASSETS Current assets: Cash and investments $ 18,646,024 Restricted.cash and investments 9,656,985 Receivables: Accounts 602,547 Interest 162,646 Loans 455,561, Deposits _ 135,000 Total current assets 29,658,763 Noncurrent assets: Capital assets: Non-depreciable 59,001 944 Depreciable,net _ 47,103,472 Total capital assets _ 106,105,416 Total noncurrent assets _ 106,105,416 Total assets 135,764,179 LIABILITIES Current liabilities: Accounts payable S70,888 Accrued payroll 105,361 Interest payable 327,190 Deposits payable 8,107 Deferred revenue 455,561 Claims payable 50,000 Long-term debt-due within one year _ 281,184 Total current liabilities _ 2,098,291 Noncurrent liabilities: Long-term debt-due in more than one year _ 15,084,793 Total noncurrent liabilities 15,084,793 Total liabilities I7,183,084 NET ASSETS Investment in capital assets,net of related debt _ 91,105,416 Restricted for: Capital projects 17,546,194 Debt service 554,076 Special projects 334,448 Total restricted _ 18,434,718 Unrestricted _ 9,040,961, Total net assets $ 118,581,095 See accompanying Notes to the Basic Financial Statements. 17 City of Saratoga Statement of Activities and Changes in Net Assets For the year ended June 30, 2002 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Totals Primary government: Governmental activities: General and intergovernmental services $ 2,005,244 $ 1,389,985 $ - $ $ 1,589,985 Public safety 3,653,114 237,718 259,988 497,706 Environmental services 650,184 626,192 35,178 661,370 Public works 4,476,568 155,661 1,383,228 1,538,889 Community services 2,120,523 1,062,673 10,000 1,072,673 Community development services 2,025,887 2,300,600 213,254 2,513,854 Interest on long-term debt 919,625 - _ _ Depreciation expense 1,529,505 - _ _ Total $ 17,380,650 $ 5,972,829 5 1,901,648 S $ 7,874,477 General revenues- Taxes: Property taxes Sales taxes Franchise taxes Local taxes Total taxes Motor vehicle in-lieu fees Investment earnings Miscellaneous Total general revenues Change in net assets Net assets-beginning of year,as restated Net assets-end of year See accompanying Notes to the Basic Financial Statements. 18 Net(Expense) Revenue and Changes in Net Assets Primary Government Governmental Activities $ (415,259) (3,155,408) 11,186 (2,937,679) (1,047,850) 487,967 (919,625) (1,529,505) (9,506,173) 4,044,295 1,066,607 1,010,609 1,1.77,436 7,298,947 1,807,802 878,734 754,252 10,739,735 1,233,562 117,347,533 $ 118,581,095 19 a S .l }' r. i 1 l41 GOVERNMENTAL FUND FINANCIAL STATEMENTS 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 accownts for all financial resources of the City which are not accounted for in another fund. Community Development Block Grant Special Revenue Fund This fund accounts for grant funds received from the Federal Government for the purpose of developing viable urban communities and for the City's rehabilitation loan program. Streets and Roads Special Revenue Fund This fund accounts for revenues and expenditures received from the Federal Government, under I.S.T.E.A. and State, Street and Highway Code Sections 2105, 2106, 2107, and 2107.5. The allocations must be spent for street maintenance or repairs; a limited amount may be spent for engineering. Development Services; Special Revenue Fund This fund accounts for revenues and expenditures associated with development of the City. Library Expansion Capital Project Fund This fund accounts for resources used for the construction. of the City's library. Capital Improvement Capital Project Fund This fund accounts for resources used for the major capital acquisition and construction activities. Other Governmental Funds Other Governmental Funds is the aggregate of all the non-major governmental funds. 23 City of Saratoga Balance Sheet Governmental Funds June 30, 2002 Major Funds Community Development Streets Development General Block Grant and Roads Services ASSETS Cash and investments $ 6,730,082 $ 91,437 $ 2,211,737 $ 1,686,291 Restricted cash and investments 8,542 122,403 - _ Receivables: Accounts 283,777 - 24,575 66,653 Interest 129,668 - _ Loans - 455,561 Deposits 135,000 - Due from other funds 9,142 _ Advances to other funds 137,111 _ Total assets $ 7,433,322 $ 669,401 $ 2,236,312 $ 1,752,944 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 354,647 $ - $ 104,256 $ 17,678 Accrued payroll 58,997 299 10,592 18,639 Due to other funds Deposits payable - Deferred revenue 455,561 Advances from other funds - 137,111 Claims payable 50,000 _ Total liabilities 463,644 592,971 114,848 36,317 Fund Balances: Reserved for: Encumbrances 164,713 1,500 113,783 2,500 Deposits 135,000 _ Petty cash 300 - AT&T settlement 16,103 - Advances to other funds 137,111 - Debt service Unreserved,designated for Unrealized investment gain 54,040 Operations 2,316,262 PERS 104,751 MIS 165,000 _ _ Unreserved,undesignated 3,876,398 74,930 2,007,681 1,714,127 Total fund balances 6,969,678 76,430 2,121,464 1,716,627 Total liabilities and fund balances $ 7,433,322 $ 669,401 $ 2,236,312 $ 1,752,944 See accompanying Notes to the Basic Financial Statements. 24 Major Funds Other Total Library Capital Governmental Governmental Expansion Improvement Funds Funds 5 - $ 5,787,856 $ 2,138,621 $ 18,646,024 9,526,040 - - 9,656,985 1,750 225,792 602,547 32,978 - - 162,646 45.5,561 13.5,000 9,142 - - 137,111 $ 9,560,768 $ 5,787,856 $ 2,364,413 $ 29,805,016 $ 263,274 $ 24,644 $ 106,389 $ 870,888 - - 16,834 105,361 9,142 9,142 8,107 8,107 455,561 137,1.11 - - 50,000 263,274 24,644 140,472 1,636,170 587,152 198,949 36,192 1,104,789 - - 135,000 300 16,103 - 137,111 - 554,076 554,076 10,157 - 64,197 2,316,262 104,751 - - 165,000 8,700,185 5,564,263 1,633,673 23,571,257 9,297,494 5,763,212 2,223,941 28,168,846 9,560,768 $ 5,787,856 $ 2,364,413 $ 29,805,016 25 - ;�"� •�. ii i� ��r��� �r_ __J !r'!` _ 3; � I[ �y 4� a�: 4i � - J City of Saratoga Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Assets June 30, 2002 Total Fund Balances-Total governmental funds $ 28,168,846 Amounts reported for governmental activities in the statement of net assets were different because: Capital assets used in governmental activities were not current financial resources. Therefore,they were not reported in the Governmental Funds Balance Sheet. The capital assets were adjusted as follows: Non-depreciable capital assets 59,001,944 Depreciable capital assets,net 47,103,472 Total capital assets 106,105,416 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. (327,190) 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: Long-term liabilities-due within one year (281,184) Long-term liabilities-due in more than one year (15,084,793) Total long-term liabilities (15,365,977) Net Assets of Governmental Activities $ 118,581,095 See accompanying Notes to the Basic Financial Statements. 27 City of Saratoga Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the year ended June 30, 2002 Major Funds Community Development Streets Development General Block Grant and Roads Services REVENUES: Property taxes $ 2,772,021 $ $ $ Special assessments _ _ Other local taxes 2,067,288 Intergovernmental-State 1,885,194 1,055,845 Intergovernmental -Federal 16,698 147,263 252,705 Franchise fees 1,010,609 - _ Use of money and property 216,562 65,991 74,678 78,572 Current service charges 956,953 - 155,660 1,806,154 Reimbursement of interfund cost allocations 1,589,985 - - Total revenues 10,515,310 213,254 1,538,888 1,884,726 EXPENDITURES: Current: General and intergovernmental services 1,943,301 - _ - Public safety 3,570 910 Environmental services - 59,077 - Public works 1,378,334 - 2,804,438 - Community services 465,241 122,405 - _ Community development services 111,520 - - 1,892,680 Capital outlay 614,171 39,067 365,373 14,070 Debt service: Principal - - - Interest and fiscal charges _ _ _ - Total expenditures 8,083,477 161,472 3,228,888 1,906,750 REVENUES OVER (UNDER)EXPENDITURES 2,431,833 51,782 (1,690,000) (22,024) OTHER FINANCING SOURCES(USES): Operating transfers in - 1,689,999 Operating transfers out (7,536,952) - Total other financing sources(uses) (7,536,952) 1,689,999 - Net change in fund balances (5,105,119) 51,782 (1) (22,024) FUND BALANCES: Beginning of year 12,074,797 24,648 2,121,465 1,738,651 End of year $ 6,969,678 $ 76,430 $ 2,121,464 $ 1,716,627 See accompanying Notes to the Basic Financial Statement,-,. 28 Major Funds Other Total Library Capital Governmental Governmental Expansion Improvement Funds Funds $ $ $ 1,234,190 $ 4,006,211 101,162 101,162 - 2,067,288 135,178 3,076,217 - 416,666 - 1,010,609 381,437 337,435 346,460 1,501,135 5,300 - 1,920,872 4,844,939 - - - 1,589,985 386,737 337,435 3,737,862 18,614,212 - - - 1,94-1,301 80,529 3,651,439 591,107 650,184 - 237,919 4,420,691 1,490,032 2,077,678 - - - 2,004,200 5,136,716 120,213 1,673,958 7,963,568 - - 100,000 1001000 - - 592,435 592,435 5,136,716 120,213 4,765,980 23,403,496 (4,749,979) 217,222 (1,028,118) (4,789,284) 5,545,990 551,953 7,7K,942 - (250,990) (7,787,942) 5,345,990 300,963 (4,749,979) 5,763,212 (727,155) (4,789,284) 14,047,473 - 2,951,096 32,953,130 $ 9,297,494 $ 5,763,212 $ 2,223,941 $ 28,168,846 29 City of Saratoga 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 For the year ended June 30, 2002 Net Change in Fund Balances-Total governmental funds $ (4,789,284) Amounts reported for governmental activities in the Statement of Activities and Changes in Net Assets were different because: Governmental funds reported 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 was the amount of capital assets recorded in the current period. 7,963,568 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 governmental funds. (1,529,505) Long-term compensated absences 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 were not reported as expenditures in governmental funds. (184,027) Bond proceeds provided current financial resources to governmental funds,but issuing debt increased long-term liabilities in the Government-Wide Statement of Net Assets. Repayment of bond principal was an expenditure in governmental funds,but the repayment reduced long-term liabilities in the Government-Wide Statement of Net Assets. Long-term debt repayments 100,000 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. (327,190) Change in Net Assets of Governmental Activities $ 1,233,562 See accompanying Notes to the Basic Financial Statements. 30 FIDUCIARY FUND FINANCIAL STATEMENTS Agency Funds Cable T.V. Trust - This fund accounts for funds of the Saratoga Community Access T.V,. Assessment Districts Bonds - This fund accumulates the monies for payment of bonds for Village Parkb-ig Districts #2 and #3, the Leonard Road Improvement District and the Saratoga Public Financing Authority which are financed by assessments placed on the County tax roll. Deposits - This fund accounts for deposits paid to the City which are subject to refund or held solely in custodial capacity. 31 City of Saratoga Statement of Fiduciary Net Assets Fiduciary Funds June 30, 2002 Agency Funds ASSETS Cash and investments $ 734,964 Restricted cash and investments 325,228 Accounts receivable 42,946 Total assets $ 1,103,138 LIABILITIES Accounts Payable $ 2,010 Due to assessment district bondholders 386,044 Deposits payable 715,084 Total liabilities $ 1,103,138 See accompanying Notes to the Basic Financial Statements. 32 City of Saratoga Index to Notes to the ]Basic Financial Statements For the year ended June 30, 2002 Page Note I - Summary of Significant Accounting Policies...................................................................35 A. Financial Reporting Entity ...............................................................................................35 B. Basis of Accounting/Measurement Focus......................................................................36 C. Cash, Cash Equivalents and Investments............................................................1..........39 D. Restricted Cash and Investments......................... ..........................................................39 E. Prepaid Items .....................................................................................................................39 F. Interfund Transactions......................................................................................................39 G. Capital Assets.....................................................................................................................40 H. Claims Pavable...................................................................................................................41 I. Compensated Absences....................................................................................................42 J. Long-Term Obligations.....................................................................................................42 K. Fund Balances ....................................................................................................................42 L. Net Assets...........................................................................................................................43 M. Use of Restricted/Unrestricted Net Assets.......................................-............................43 N. Property 'Tax and Special Assessments...........................................................................43 O. Uses of Estimates P. Implementation of New GASB Pronouncements.........................................................44 Note2 - Cash and Investments............................................................................................................44 Note3 - Loans Receivable ...................................................................................................................49 Note 4 - Interfund Transactions...................................................................................................... 49 City of Saratoga Index to Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 Page Note5 - Capital Assets.........................................................................................................................51 Note6 - Long-Term Debt.....................................................................................................................52 Note7- Non-City ObIigations ...........................................................................................................54 Note 8 - Reserved and Designated Fund Balances.........................................................................55 Note9 -Risk Management..................................................................................................................56 Note10 - Retirement Plans..................................................................................................................5 7 Note 11 Joint Powers Agreements...................................................................................................58 Note 12 - Commitments and Contingencies....................................................................................59 Note13 - Subsequent Events..............................................................................................................59 Note 14 - Implementation of GASB Pronouncements and Prior Period Adjustments ...........60 34 City of Saratoga Notes to the Basic Financial Statements For the year ended June 30, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The basic financial statements of the City of Saratoga, California, (City) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental agencies. The Governmental Accounting Standards Boards (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the City's accounting policies are described below. A. Financial Reporting Entity The City was incorporated as a municipal corporation in 1956 under the general laws of the State of California, and had a population of 30,444 at June 30, 2002. 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, 2002, the City's staff comprised 62 full. time employees who were responsible for the following CA_y provided services: ♦ Public Safety - The City provides round-the-clock police services under a contract with the County Sheriff's offices. Fire services are provided by special district. Emergency management, code enforcement and inspection services are provided by 2 City employees. 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 10 employees. ♦ General Government services are provided by a total of 16 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 Cite. Blended component units, although legally separate entities are, in substance, part of the City's 35 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued A. Financial Reporting Entity, Continued 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 goverrunent- 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. The following entities are reported as blended component units: Saratoga Public Financing Authority - The Saratoga Public Financing Authority (Authority) is a joint powers authority organized by the City of Saratoga (City) and the City of Saratoga Parking Authority (Parking Authority) on June 16, 1993, under the laws of the State of California. The Authority was organized to provide financial assistance to the City and Districts for public improvements for the City and the purchase by the Authority of Local Obligations within the meaning of the Act. Lighting and Landscaping Assessment District #1 - The Lighting and Landscaping Assessment District #1 (District) was established in 1980 for the levy and the collections of assessments upon the several lots or parcels of land in the District, and for the construction or installation of improvements, including maintenance or servicing, or both. Complete financial statements for each component unit may be obtained from the City of Saratoga, 13777 Fruitvale Avenue,Saratoga, CA 95070. B. Basis of Accounting and Aleasurement 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. 36 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accouaztirig aftd Measurement Focus, Continued 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: • Due to/ other funds • Advances to/from other funds • Operating transfers in/out The City applies all applicable GASB pronouncements (including all NCGA Statements and Interpretations currently in effect) as well as the following pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements: 'Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board (APB) Opinions, and Accounting Research Bulletins (ARB) of the committee on Accounting Procedure. The City applies all applicable FASB Statements and Interpretations issued after November 30, 1989, except those that conflict with or contradict GASB pronouncements. 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. 'The City has presented all. major funds that met the applicable criteria. 37 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurenxent Focus, Continued 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 (generally 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. Fiduciaryund Financial Statements - Fiduciary fund financial statements include a Statement of Net Assets. The City's fiduciary funds represent agency funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The agency funds are accounted for on a spending or current financial resources measurement focus and the modified accrual basis of accounting as are the governmental funds explained above. 38 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued C. Cash, Cash Equivalents and Investments The City pools its available cash for investment purposes. The City's cashi 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. In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, highly liquid market investments with maturities of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. Market value is used as fair value for those securities for which market quotations are readily available. 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. D. Restricted Cash and Investments Certain restricted rash and investments are held by a fiscal agent for the redemption of bonded debt and for acquisition and construction of capital projects. E. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items. F. Interfund Transactions Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred -to as either "due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the noncurrent portion of interfund loans). All other outstanding balances between funds are reported as "due to/ other funds." Advances between funds, are reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. 39 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,Continued G. Capital Assets Capital assets, which includes 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 $1,000. 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: Buildin s and structures 40 years Machinery and equipment 5-10 years Infrastructure 20-50 years In June 1999, the Governmental Accounting Standards Board (GASB) issued Statement No. 34 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 into its basic financial statements. The City defines infrastructure as the basic physical assets that allow the City to function. The City defines infrastructure as the basic physical assets including 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, 2001. This condition assessment will be performed every 3 years. 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. 40 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued G. Capital Assets, Continued The following conditions were defined: Condition Ratin Excellent 86-100 Very Good 71-85 Good 56-70 Fair 41-55 Poor 26-40 Very Poor 11-25 Substandard 0-10 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 has completed an internal update for June 30, 2002. 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. H. 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. 41 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued L 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, rather than currently available financial resources. J. Long-Tenn 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. K. Fund Balances In the fund financial statements, governmental funds report 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. Designations of fund balances represent tentative management plans that are subject to change. City Council has designated an amount for operations, which it has defined as being equal to the greater of one-quarter of the total budgeted General Fund appropriations for the current budget year or $2,000,000. The designation is increased annually by an amount equal to the interest the City earned on an equivalent amount of cash and investments. 42 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued L. Net Assets In the governmental-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 clef inition of "invested in capital assets, net of related debt" or"restricted net assets." M. Use of Res tricted/Cinrestricted 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. N. 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. O. 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. 43 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued P. Implementation of New GASB Pronouncements In 2002, the City adopted new accounting standards in order to conform to the following Governmental Accounting Standards Board Statements: ♦ Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments. ♦ Statement No. 37, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments: Omnibus ♦ Statement No. 38, Certain Financial Statement Note Disclosures GASB Statement No. 34 is a new financial reporting requirement for local governments in the United States. The City has implemented this pronouncement and has restructured much of the information that it has presented in the past. The main goal is to make the reports more comprehensive and easier to understand and use. GASB Statement No. 37 address selected issues and amends GASB Statement No. 21, Accounting for Escheat Property, and No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments. These Statements make selective changes including accounting for Escheat Property, Management's Discussion and Analysis, Capitalization of Construction-Period Interest, Modified Approach for Reporting Infrastructure, Program Revenues and Major Fund Criteria. GASB Statement No. 38 establishes and modifies disclosure requirements related to Summary of Significant Accounting Policies, actions taken to address violations of significant finance - related legal and contractual provisions, debt and lease obligations, short-term debt, disaggregation of receivable and payable balances, and interfund balances and transfers. 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_ A. Cash Deposits The carrying amounts of the City's cash deposits were $3,578,350 at June 30, 2002. Bank balances before reconciling items were $5,160,425 at that date. The total amount of which was collateralized or insured with securities held by the pledging financial institutions in the City's name is discussed below. 44 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 2. CASH AND INVt:STMENTS, Continued A. Cash Deposits, Continued 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 in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in the City's name. The market value of pledged securities must equal at least 110% 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% of the City's total cash deposits. The City may waive collateral requirements for cash deposits which are fully insured up to $100,000 by the Federal Deposit Insurance Corporation. The City, however, has not waived the collateralization requirements. The City follows the practice of pooling cash and investments of all funds, excei t for funds required to be held by fiscal agents under the provisions of bond indentures. Interest income earned on pooled cash and investments is allocated on an accounting period basis to the various funds based on the period-end cash and investment balances. 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 has complied with the provisions of GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investments Pools. No current adjustments have been made to the accompanying basic financial statements, because the City's investments were primarily in the State of California Local Agency Investment Fund and the fair value adjustment was irnmaterial. 45 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 2. CASH AND INVESTMENTS, Continued B. Investments, Continued The City's investments with Local Agency Investment Fund (LAIF) at June 30, 2001, 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. As of June 30, 2002, the City had $19,492,008 invested in LAIF as cash and investments and $3,663,433 invested in LAIF as restricted cash and investments, which had invested 3.086% of the pool investment funds in Structured Notes and Asset-Backed Securities. The LAIF fair value factor of 1.002780144 was used to calculate the fair value of the investments in LAIF. C. Credit Risk Governmental Accounting Standards Board Statement No. 3 requires that deposits and investments be classified by credit risk. Classifications of deposits and investments by credit risk are as follows: Deposits Categon' 1 - Insured or collateralized with securities held by the entity, or by its agent in the entity's name. Categonj 2 - Collateralized with securities held by the pledging financial institutions trust department or agent in the entity's name. Categorij3- Deposits which are uninsured or uncollateralized. 46 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 2. CASH AND INVESTMENTS, Continued C. Credit Risk, Continued Investments CategoU I - Insured or registered or securities held by the entity or its agent in the entity's name. Categonl 2 - Uninsured and unregistered, with securities held by the counterparty's trust department or agent in the entity's name. Catego!2L 3 -- Uninsured and unregistered, with securities held by the counterparty, or by its trust department or agent, but not in the entity's name. Investments Not Subject to Categorization - Investments in the California Local Agency Investment Fund (LAIF) are not categorized, as GASB No. 3 does not require categorization of investment pools managed by another government. Certain fiscal agent investments are not categorizes[ because the underlying assets are open-ended mutual funds. Guaranteed investment contracts are not categorized because they are direct contractual -investments and are not securities. All such investments are not required to be categorized under interpretive guidelines issued by the GASB. D. Summartt of Cash and Investments The following is a summary of pooled cash.and investments and restricted cash and investments at June 30,2002: Government-Wide Fiduciary Funds Statement of Net Assets Statement of Governmental Activities Net Assets Totals Pooled cash and investments $ 18,646,024 $ 734,964 $ 19,380,988 Restricted cash and investments 9,656,985 :325,228 9,982,213 Totals $ 28,303,009 $ 1,060,192 5 29363,201 47 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 2. CASH AND INVESTMENTS, Continued D. Summary of Cash and Investments, Continued Deposits and investments were categorized as follows at June 30, 2002: Not Required Category to be Fair 1 Categorized Value City Treasury: Demand Deposits: Cash deposit $ 3,578,350 $ - $ 3,578,350 Certificates of deposit 1,136,542 - 1,136,542 Total demand deposits 4,714,892 - 4,714,892 Investments: Local agency investment fund - 19,492,008 19,492,008 Total investments - 19,492,008 19,492,008 Total deposits and investments 4,714,892 19,492,008 24,206,900 Cash and Investments with Fiscal Agents: Cash deposits 1,167,705 - 1,167,705 Money market mutual funds - 165,163 165,163 Guaranteed investment contract 160,000 160,000 Local agency investment fund - 3,663,433 3,663,433 Total cash and investments with fiscal agents 1,167,705 3,988,596 5,156,301 Totals $ 5,882,597 $ 23,480,604 $ 29,363,201 At June 30, 2002, the City had no category 2 or 3 deposits or investments. E. Summary of Cash and Investments to Maturity Pooled cash and investments grouped by maturity date at June 30, 2002,are shown below: Maturity Fair Value Current to one year $ 24,206,900 48 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 3. LOANS RECEIVABLE At June 30, 2002, the City had the following loan receivable: Housing Rehabilitation Loan Program $ 455,561 The Citv administers a housing rehabilitation program called the Saratoga Housing, Assistance and Rehabilitation Program (SHARP) using Housing and Community Development Act funds. Under the SHARP, 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. At June 30, 2002, the City had outstanding SHARP loans of $455,561. During the year ended June 30, 2002, the City received $56,748 in repayments from all participants. 4. INTERFUND TRANSACTIONS A. I)ue to/froin 00ter Funds At June 30, 2002, the City had the following due to/ other funds: Due:Co Other Funds Transportation Development Due From Other Funds Act General Fund $ 9,142 The above due to/from other funds were short-term receivables or payables in the normal course of the City's operation. 49 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 4. INTERFUND TRANSACTIONS, Continued B. Long-Term Advances At June 30, 2002, the City had the following long-term advances: Advances From Other Funds Community Development Block Grant Special Advances To Other Funds Revenue Fund General Fund $ 137,111 The advances were used for cash flow purposes and will be repaid as cash becomes available within the Community Development Block Grant Special Revenue Fund. However, there are no set dates for repayment. C. Operating Transfers Operating transfers for the year ended June 30, 2002 were as follows: Operating Transfers Out Park Development General Capital Operating Transfers In Fund Projects Fund Totals Capital Projects Funds: Streets and Roads $ 1,689,999 $ - $ 1,689,999 Capital Improvement 5,295,000 250,990 5,545,990 Special Revenue Fund: Recreation 551,953 - 551,953 Total $ 7,536,952 $ 250,990 S 7,787,942 The above operating transfers resulted from the normal course of the City's operation. 50 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 5. CAPITAL ASSETS Capital assets activity for the year ended June 30, 2002, consisted of the following: Primary Government Balance Inventory Balance July 1,2001 Additions Retirements Adjustments June 30,2002 Governmental Activities: Capital assets,not being depreciated: Land and land improvements $ 4,797,848 $ - $ - $ 32,992 $ 4,830,840 Construction in progress - 7,585,193 - 1,403,146 8,988,339 Infrastructure: Street payment system 45,182,765 - - _ 45,182,765 Totals capital assets, not being depreciated 49,980,613 7,585,193 - 1,436,138 _ 59,001,944 Capital assets,being depreciated: Buildings and structures 6,176,179 - - (1,324,427) 4,851,752 Machinery and equipment: 2,537,454 378,375 - (1,184,527) 1,731,302 Infrastructure: Bridges 1,554,653 9,001 - - 1,563,654 Signs and lights 762,527 - - 762,527 Drainage system 39,844,721 - - 39,844,721 Sidewalks 11,475,780 - - - 17,475,780 Totals capital assets being depreciated 62,351,314 387,376 - (2,508,954) 60,229,736 Accumulated depreciation - (1,529,505). - (11,596,759) _ (13,126,264) Totals capital assets, being depreciated,net 62,351,314 (1,142,129)- - (14,105,713) _ 47,103,472 Governmental activities capital assets,net $ 112,331,927 $ 6,443,064 $ - $ (12,669,575) ;$ 106,105,416 Depreciation expense for the depreciable capital assets was $1.,529,505 in 2002. 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. 51 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 6. LONG-TERM DEBT A summary of the City's long-term debt transactions for the year ended June 30, 2002, is presented below. Classification Amounts Amounts Balance Balance Due Within Due in More Description July 1,2001 Additions Retirements June 30,2002 One Year than One Year General Obligation Bonds: 1976 Library Bonds $ 1,00,000 $ - $ (100,000) $ - $ - $ - 2001 Library Bonds 15,000,000 - - 15,000,000 60,000 14,940,000 Claims Pavable 50,000 - - 50,000 - 50,000 Compensated Absences 131,950 184,027 - 315,977 221,184 94,793 Totals $ 15,281,950 $ 184,027 $ (100,000) $ 15,365,977 $ 281,184 $ 15,084,793 General Obligation 1976 Library Bonds - Original Issue$1,200,000 On December 15, 1976, the City issued General Obligation 1976 Library Bonds of $1,200,000. The proceeds of the bonds were used to construct a library and associated site improvements which are leased to County of Santa Clara. Lease revenues received from the Countv are pledged for repayment of the bonds. Interest on the bonds is payable on June 15 and December 15 of each year, at 5% to a maximum of 7%. Principal is due annually on December 15. The bonds mature on December 15, 2001. At June 30, 2002, the General Obligations 1976 Library Bonds were paid in full. 52 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 6. LONGTERM DEBT, Continued 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% to 6% 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, 2032 and are subject to redemption prior to maturity at redemption prices ranging from 100`,% to 101% of par. The bonds may be called for redemption beginning on or after August 1, 20-11, at the option of the City. At June 30, 2002, the outstanding balance of the bonds was $15,000,000. The annual debt service requirements on these bonds are as follows: For the Year Ending June 30, Principal Interest Totals 2003 $ 60,000 $ 783,756 $ 843,756 2004 245,000 776,131 1,021,13.1 2005 255,000 763,631 1,018,631 2006 270,000 750,506 1,020,506 2007 280,000 736,756 1,016,756 2008-2012 1,655,000 3,411,930 5,066,930 2013- 2017 2,140,000 2,891,280 5,031,280 2018-2022 2,555,000 2,309,550 4,864,550 2023-2027 3,290,000 1,564,011 4,854,011 2028-2032 4,250,000 580,651 4,830,651 Totals $ 15,000,000 $ 14,568,202 $ 29,568,202 53 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 6. LONG-TERM DEBT, Continued Claims Payable At June 30, 2002, the claims payable has been accrued. See Note 10 Risk Management for more information. The total amount of the claims payable was$50,000 at June 30, 2002. Compensated Absences The City's liability for vested and unpaid compensated absences (accrued vacation and sick pay) has been accrued and arriounts to $315,977at June 30, 2002. 7. NON-CITY OBLIGATIONS The following bonds bearing the City's name were issued to finance redevelopment projects; however, neither the faith and credit nor the general taxing power of the City has been pledged to the payment of the bonds. Furthermore, the City has no obligation for the payment of the bonds in the case of default. Therefore, the following obligations are not included in the accompanying basic financial statements. Original Outstanding at Amount June 30,2002 Parking Assessment Districts#2 and#3 $ 1,244,900 $ 440,000 Leonard Road Improvement Assessment District 101,686 70,000 Saratoga Public Financing Authority 1993 Revenue Bonds 1,600,000 660,000 The City is the collecting agent for Village Parking Assessment Districts #2 and #3 and the Leonard Road Improvement District, but is not obligated for the repayment of debt issued by these Districts. As a result, these Districts have not been included in the basic financial statements of the City. 54 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30,2002 8. RESERVED AND DESIGNATED FUND BALANCES Fund balances at June 30,2002, have been preserved and designated for the following purposes: Special Debt Capital General Revenue Service Projects Fund Funds _ Fund Funds _ Totals Reserved for: Encumbrances $ 164,713 $ 153,975 $ - $ 796,101 $ 1,104,789 Deposits 135,000 - - - 135,000 Petty cash 300 - - - 300 AT&T settlement 16,103 - - - 16,103 Debt service - - 554,076 - 554,076 Advances to other funds 137,111 - - - 137,111 Total reserved 453,2227 153,975 554,076 786,101 1,947,379 Designated for: Unrealized investment gain 54,040 - - 10,157 64,197 Operations 2,316,262 - - - 2,316,262 PERS 104,751 - - - 104,751 MIS 165,000 - - - 165,000 Total designated 2,640,053 - _ - 10,157 _ 2,650,210 Unreserved,Undesignated 3,876,398 4,950,923 - 14,743,936 2:3,371,257 Total fund balances 5 6,969,678 $ 5,104,898 $ 554,076 $ 15,540,194 $ 28,168,846 55 City of Saratoga Notes to the Basic Financial Statements,Continued For the year ended June 30, 2002 9. RISK MANAGEMENT The City participates in the following public entity risk pools: ABAG Plan Corporation (ABAG PLAN) covers general liability claims in an amount up to $7,000,000. 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, 2002, the City contributed S88,195 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 claims up to the statutory limit. The City has no deductible for these claims. During the fiscal year ended June 30, 2002, the City contributed $166,255 for current year coverage. The City's contributions to each risk pool equal the ratio of the City's payroll to the total payrolls of all entities participating in the same layer of each program, in each. program- year. Actual surpluses or losses are shared according to a formula developed from overall loss costs and spread to member entities on a percentage basis after a retrospective rating. There have been no significant reductions of insurance settlements that exceeded insurance coverage for the past three years. The workers' compensation and general liability claims payable of $100,000 reported at June 30, 2002, 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 liability amounts were as follows: Year Claims Claims and Claims Ended Payable Changes in Claims Payable June 30, July 1 Estimates Payments June 30 2000 $ 100,000 $ 6,530 $ (6,530) $ 100,000 2001 100,000 15,279 (15,279) 100,000 2002 100,000 32,061 (32,061) 100,000 56 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 9. RISK MANAGEMENT, Continued 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 for the fiscal year ended June 30, 2001: Total assets $ 33,366,139 Total liabilities $ 15,749,511 Fund equity $ 17,616,628 Total revenues $ 1,430,000 Total expenses $ 1,472,804 Net increase in fund equity $ (42,804) Audited financial information for each risk pool may be obtained from ABAG at P. O. Box 2089,Oakland, California 94604-2089. 10. RETIREMENT PLANS Pension Plan PIan Descri Lion - The City contributes to the California Public Employees Retirement System (PERS), an agent multiple-employer public employee defined benefit pension plan. PERS provides retirement and disability benefits, annual. cost-of-living adjustments, and death benefits to plan members and beneficiaries. PERS acts 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 PERS' annual financial report may be obtained from. their Executive Office located at 400 P Street, Sacramento, California 95814. Funding Police - Active plan members are required by state statute to contribute for miscellaneous employees 7% of their annual covered salary. The City employer makes the contributions required of City employees on their behalf and for their account, which amounted to 1,1,239,614 for the year ended June 30, 2002. The City employer is required to contribute for fiscal year 2001-2002 at an actuarially determined rate of 0% of annual covered payroll for miscellaneous employees. 57 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 10. RETIREMENT PLANS, Continued Pension Plan, Continued Annual Pension Cost - For fiscal year 2001-2002, the City's annual pension cost of $241,114 for PERS was equal to the City's required and actual contributions. The required contribution was determined as part of the June 30, 2000 actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions included (a) 8.25% investment rate of return (net of administrative expenses), (b) projected annual salary increases ranging from 3.75% to 14.2% for miscellaneous employees depending on age, service, and type of employment, and (c) 2% per year cost-of-living adjustments. Both (a) and (b) included an inflation component of 3.5%. The actuarial value of PERS assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a three-year period. PERS 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, 2000,was 30 years for miscellaneous employees. THREE-YEAR TREND INFORMATION FOR PERS Annual Percentage of Pension Cost APC Net Pension Fiscal Year (APC) Contributed Obligation 6/30/00 $ 177,433 100% $0 6/30/01 188,080 100% 0 6/30/02 241,114 100% 0 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. 58 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 12. COMMITMENTS AND CONTINGENCIES A. Lawsuits The City is presently involved in certain matters of litigation that have arisen in the normal course of conducting City business. City management believes, based upon consultation with the City Attorney, that these cases, in the aggregate, are not expected to result in a material adverse financial impact on the City. Additionally, City management believes that the City's insurance programs are sufficient to cover any potential losses should an unfavorable outcome materialize. B. 17ederaI 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. No cost disallowance is expected as a result of these audits; however, these programs are subject to further examination by the grantors. 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. As of June 30, 2002, in the opinion of Citv management, there were no additional outstanding matters that would have a significant effect on the financial position of the funds of the City. 13. SUBSEQUENT EVENTS Early May 2002, the City issued a non-refundable good faith purchase deposit of $135,000 for the application to bid on a property owned by the Grace Methodist Church. The cost of the property, now known as the North Campus, was purchased for $4.5 million utilizing $1 million from a Hillside CIP reserve and $3.5 million from unallocated General Fund reserves on July 18, 2002. The following options were considered for potential use of the property: 1. Move Senior Center programs to new site and move Sheriff's Office to current Senior Center. 2. Demolish sanctuary and education buildings and use portable from. library for community meeting space and recreation use. 3. Demolish sanctuary and education buildings, purchase library portable and move Sheriff's Office in portable on Church property. 4. Renovate administration building only, for office, recreation and community meeting room usage, deferring the rehabilitation of other buildings on.the site. 5. Demolish existing buildings on the property and provide grass and irrigation for open space and sports league practice. 6. Mothball existing buildings and utilize open space for a day use park. 59 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 14. IMPLEMENTATION OF GASB PRONOUNCEMENTS AND PRIOR PERIOD ADJUSTMENTS The City has recorded the implementation of new GASB pronouncements. Accordingly, the City's equity as of July 1, 2001 has been restated as follows: Equity, Implementation As Previously of New GASB Equity, Reported Pronouncements as restated Government-Wide Financial Statements: Go\,,ernment activities $ 321958,130 $ 84,389,403 $ 117,347,533 With the implementation of new GASB pronouncements, the capital assets including infrastructure, long-term debt, and interest payable were recorded in the Government-Wide Financial Statements; however, these were not recorded in the Fund Financial Statements. 60 City of Saratoga Required Supplementary Information For the year ended June 30, 2002 1. BUDGETARY INFORMATION Through the budget, the City Council sets the direction of the City, allocates its resources and establishes its priorities. The Annual Budget assures the efficient and effective uses of the City's economic resources,as well as establishing that the highest priority objectives are accomplished. The Annual Budget serves from July 1 to June 30, and is a vehicle that accurately and openly communicates these priorities to the community, businesses, vendors, employees and other public agencies. Additionally, 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 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 budget includes proposed expenditures and the means of financing them. b. Public hearings are conducted to obtain taxpayer comments. c. The budget is legally enacted through passage of a resolution. d. 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. Formal budgetary integration in the form of legally adopted budgets is employed as a management control device for all funds except the agency 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, contacts, 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 and capital projects funds. Unexpended and unencumbered appropriations of these governmental funds automatically lapse at the end of the fiscal year. Encumbrances outstanding at year-end are reported as a reservation of fund balances. They do not constitute expenditures or estimated liabilities. 62 City of Saratoga Required Supplementary Information, Continued For the year ended June 30, 2002 1. BUDGETARY INFORMATION, Continued The followings are the budget comparison schedules for General Fund and all major special revenue funds. Budget Comparison Schedule, General Fund For the Year Ended June 30, 2002 Favorable (Unfavorable) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Fund Balances- Beginning $ 10,425,256 $ 12,074,796 $ 12,074,797 $ 1 Resources(inflows): Property taxes 21096,398 2,117,003 2,772,021 655,018 Special assessments 296,366 295,366 - (295,366) Other local taxes 2,384,500 2,223,235 2,067,288 (155,947) Intergovernmental-State 1,588,800 1,588,800 1,885,194 296,394 Intergovernmental-Federal - 16,698 16,698 Franchise fees 845,000 858,310 1,010,609 152,299 Use of money and property 458,200 458,200 216,562 (241,638) Current service charges 599,927 990,548 956,953 (33,595) Reimbursement of vaterfund cost allocations 1,845,085 1,845,085 1,589,985 (255,100) Operating transfers in - - 262,091 - (262,091.) Amount available for appropriations 10,114,276 10,655,336 10,515,310 122,065 Charges to Appropriations (outflows): Current: General and intergovernmental services 2,865,605 1,814,459 1,943,301 (1,28,842) Public safety 3,190,809 3,495,422 3,570,910 (75,488) Public works 949,660 1,472,862 1,378,334 94,528 Community services 274,582 531,853 465,241 66,612 Community development services 96,854 131,818 1.11,520 20,298 Capital outlay 610,358 978,241 614,171 364,070 Operating transfers out 3,590,851 7,797,049 7,536,952 260,097 Total charges to appropriations 11,578,719 16,221,704 15,620,429 601,275 resources over(under) charges to appropriations (1,464,443) (5,566,368) (5,105,119) 461,249 Fund Balances-Ending $ 8,960,813 $ 6,508,428 $ 6,969,678 $ 461,250 63 City of Saratoga Required Supplementary Information, Continued For the year ended June 30, 2002 1. BUDGETARY INFORMATION, Continued Bird etart Comparison Schedule Coanm:snih Development Block Grant Fund For the Yea r_Ended [une 30, 2002 Favorable (Unfavorable) Budseted Amounts Actual Variance with Original Final Amounts Final Budget Fund Balances- Beginning $ 119,659 $ 24,649 $ 24,648 $ {1) Resources (inflows): Intergovernmental- Federal 180,874 180,874 147,263 (33,611) Use of money and property 3,000 3,000 65,991 62,991 Operating transfers in 15,359 57,981 - (57,981) Amount available for appropriations 199,233 241,855 213,254 (28,601) Charges to Appropriations (outflows): Community services 129,233 129,233 122,405 6,828 Capital outlays 137,271 137,271 39,067 98,204 Total charges to appropriations 266,504 266,504 161,472 1,05,032 resources over (under) charges to appropriations (67,271) (24,649) 51,782 76,431 Fund Balances - Ending $ 52,388 $ - $ 76,430 $ 76,430 64 on, Continued Continued Streets grid Roads -Fund Favorable (Unfavorable) Bud 4a- Amounts Actual Variance with OriginaJ� — Final Amounts Final Budget $ 1,806,DOs p $ 2,121,460 $ 2,121,465 $ 5 2,321,CDS(3w 2 2,321,002 1,055,845 (1,265,157) 971,6' 2 971,652 252,705 (718,947) - 74,678 74,678 (o 259,700 155,660 (1,04,040) 3,316,2 4 1,816,274 1,689,999 (126,275) ations 6,868,E _ -'E 3 5,368,628 3,228,887 (2,139,741) ows): 365, CC- Q0 46 365,006 59,077 305,929 2,918, E 4,369,093 2,804,438 1,564,655 5,013,- 2 2,023,425 365,373 1,658,052 s 8,297- 6 6,757,524 3,228,888 3,528,636 (1,428- ^ 8) (1,388,896" (1) 1,388,895 $ 2 $ 732,564 $ 2,121,464 5 1,388,900 65 City of Saratoga Required Supplementary Information, Continued For the year ended June 30, 2002 1. BUDGETARY INFORMATION, Continued Budgetary Comparison Schedule, Development Services Fund For the Year Ended June 30, 2002 Favorable (Unfavorable) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Fund Balances- Beginning $ 1,461,334 $ 1,738,649 $ 1,738,651 $ 2 Resources (inflows): Use of money and property - - 78,572 78,572 Current service charges 1,616,000 1,785,780 1,806,154 20,374 Amount available for appropriations 1,616,000 1,785,780 1,884,726 98,946 Charges to Appropriations (outflows): Community development services 1,856,687 1,935,722 1,892,680 43,042 Capital outlays 20,135 23,411 14,070 9,341 Total charges to appropriations 1,876,822 1,959,133 1,906,750 52,383 resources over(under) charges to appropriations (260,822) (173,353) (22,024) 151,329 Fund Balances- Ending $ 1,200,512 $ 1,565,296 $ 1,716,627 $ 151,331 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 and provides 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 system 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 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. 66 City of Saratoga Required Supplementary Information, Continued For the year ended June 30, 2002 2. MODIFIED APPROACH FOR CITY STREETS INFRASTRUCTURE CAPITAL ASSETS, Continued 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, 2001. 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 1352 centerline miles of pave surfaces. The City's road system can be grouped by function class and includes 19.3 centerline miles of arterial, 23.3 centerline miles of collector, and 92.6 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 following conditions were defined: Condition Rating Excellent 86-100 Very Good 71-85 Good. 56-70 Fair 41-55 Poor 26-40 Very Poor 11-25 Substandard 0-10 67 City of Saratoga Required Supplementary Information, Continued For the year ended June 30, 2002 2. MODIFIED APPROACH FOR CITY STREETS INFRASTRUCTURE CAPITAL ASSETS, Continued The City Policy is to achieve an average rating of 70 for all streets, which is a 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, 2002, the City's street system was rated at a PCl index of 70 on the average with the detail condition as follows: Condition % of Streets Excellent to Good 78% Fair 13% Poor to Substandard 9% The City expended $2,214,717 on street maintenance for the year ended June 30, 2002. These routine maintenance expenditures delayed deterioration. The budget required to maintain and improve the current level of overall condition through the year 2005 is a minimum of $4,500,000. ($1,500,000 projected budget each year for the years ending June 30, 2003, 2004, and 2005.) A schedule estimated annual amount calculated to maintain and preserve its streets at the current level compared to actual expenditures for street maintenance for the last three years is presented below: Funded by Actual Funded by Gas Tax Total Fiscal Year Budget Expenditures General Fund Fund Funded 1999-00 $ 1,846,839 $ 1,686,129 $ 1,095,289 $ 590,840 $ 1,686,129 2000-01 2,520,255 801,160 205,309 595,851 801,160 2001-02 3,529,420 2,214,717 1,631,855 582,862 2,214,717 As of June 30, 2002, approximately 22% 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 amounted to approximately $9,700,000 for all streets. 68 City of Saratoga Required Supplementary Information, Continued For the year ended June 30, 2002 3. DEFINED PENSION PLAN A schedule of funding progress for the year ended June 30, 2002 including the past three actuarial valuation; is presented below. Miscellaneous Employees Unfunded Actuarial Entry Age Overfunded Liability as Actuarial Actuarial Actuarial Actuarial Percentage of Valuation Asset Accrued Accrued Funded Covered Covered Date* Value Liability Liability Ratio Payroll Payroll 6/30/1998 $ 15,721,109 $ 11,459,289 $ 4,261,820 137.2% $ 2,127,638 200.3% 6/30/1999 17,347,660 1.2,626,128 4,721,532 137.4% 2,489,253 189.7% 6/30/2000 18,956,430 13,716,661 5,239,769 138.21. 2,569,891 203.9% * Latest information available. 69 LL� SC� r1I1 i _.. �� Y7� �I RJ r�' ��.'�`� s�,!1, �f '�v _,_ �t. K '� �". �f�I� ~ �,.y�'- - �'U.t,� � �, i I�� 1�1�_ �'-xl, •a"'�, �� ,� I �.._'�c s_ r'�i i'��i n:-' r ::^:+ _._ - '�f.� �v 5 �f r$: � j� �� :.perry._ mod. _ _ „-.F NON-MAJOR GOVERNMENTAL FUNDS Special Revenue Funds Traffic Safety - This Bold accounts for vehicle code fine and forfeiture revenues and related public safety expenditures. Lighting and Landscaping Assessment District #1 - This fund accounts for revenues and expenditures associated with development of the City. Environmental Programs - This fund accounts for environmental fees accumulated to offset the cost of environmental programs budgeted in the General Fund. Recreation - This fund accounts for the City's recreation program revenues and related program expenditures. Transportation Development - This fund accounts for grants received from the State of Local Law Enforcement - This fund accounts for State Supplemental Law Enforcement entitlement allocated based on population. Debt Service Fund Library Debt - Santa Clara County lease revenues are accumulated in this fund to pay annual. principal and interest payments on the 1976 and. 2001 library bonds. Capital Projects Fund Park Development - This fund accounts for resources used for the acquisition and construction of major capital facilities by the City, primarily the acquisition and construction of various City parks. 73 City of Saratoga Combining Balance Sheet Nonmajor Governmental Funds June 30, 2002 Special Revenue Lighting and Landscaping Transportation Traffic Assessment Environmental Development Safety District#1 Programs Recreation Act ASSETS Cash and investments $ 91,606 $ 125,624 $ 795,017 $ 51,947 $ - Accounts receivable 18,944 594 84,097 186 9,142 Total assets $ 110,550 $ 126,218 $ 879,114 $ 52,133 $ 9,142 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 773 $ 606 $ 55,398 $ 30,228 $ Accrued payroll - 916 1,134 13,798 - Due to other funds - - - - 9,142 Deposits payable - - - 8,107 - Total liabilities 773 1,522 56,532 52,133 9,142 Fund Balances: Reserved for: Encumbrances 36,192 Debt service - - Unreserved,undesignated 109,777 124,696 786,390 Total fund balances 109,777 124,696 822,582 - - Total liabilities and fund balances $ 110,550 $ 126,218 $ 879,114 $ 52,133 $ 9,142 74 Debi: Capital Service Projects Total Other Local Law Park Governmental Enforcement Library Development Funds $ 134,308 $ 441,247 $ 498,872 $ 2,138,621 - 112,829 - 225,792 $ 134,308 $ 554,076 $ 498,872 $ 2,364,413 $ $ $ 19,384 $ 106,389 986 - - 16,834 - 9,142 - - 8,107 986 - 19,384 140,472 - - 36,192 554,076 - 554,076 133,322 - 479,488 1,633,673 133,322 554,076 479,488 2,223,941 $ 134,308 $ 554,076 $ 498,872 $ 2,364,413 75 City of Saratoga Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the year ended June 30, 2002 Special Revenue Lighting and Landscaping Transportation Traffic Assessment Environmental Development Safety District#1 Programs Recreation Act REVENUES: Property taxes $ - $ 119,542 $ $ $ Special assessments - 101,162 Intergovernmental-State - - 35,178 - Use of money and property 768 5,574 31,520 149,170 Current service charges 132,034 - 594,671 816,767 Total revenues 132,802 226,278 661,369 965,937 EXPENDITURES: Current: Public safety 20,968 - - Environmental services - - 591,107 - Public works - 237,919 - - Community services - - - 1,490,032 Capital outlay - 3,029 35,963 Debt service: Principal _ - - Interest and fiscal charges - _ - Total expenditures 20,968 237,919 594,136 1,525,995 REVENUES OVER 111,834 (11,641) 67,233 (560,058) (UNDER) EXPENDITURES OTHER FINANCING SOURCES(USES): Operating transfers in - - 551,953 Operating transfers out _ Total other financing sources(uses) - 551,953 Net change in fund balances 111,834 (1.1,641) 67,233 (8,105) FUND BALANCES: Beginning of year (2,057) 136,337 755,349 8,105 End of year $ 109,777 $ 124,696 $ 822,582 $ - $ 76 Debi: Capital Service Projects Total Other Local Law Park Governmental Enforcement Library Development Funds $ $ 1,114,648 $ - $ 1,234,190 - - 101,162 100,000 - - 135,178 5,376 115,579 38,473 346,460 - - 377,400 1,920,872 105,376 1,230,227 415,873 3,737,862 59,561 - - 80,529 - - 591,107 237,919 - 1,490,032 - 1,634,966 1,673,958 100,000 - 100,000 - 592,435 - 592,435 59,561 692,435 1,634,966 4,765,980 45,815 537,792 (1,219,093) (1,028,118) 551,953 (250,990) (250,990) (250,990) 300,963 45,815 5-.7,792 (1,470,083) (727,155) 87,507 16,284 1,949,571 2,951,096 $ 133,322 $ 554,076 $ 479,488 $ 2,223,941 ,}� :,i .r ti,' __ ��,f�:.a�l r - � �� + r.Fri--,- ��"r, r, o-` ,f? i r �+� �-.. --._Q-. _� ��,, -1,. :ri h'' �. .a��r, r�' D� `J: �' City of Saratoga Capital Assets Used in the Operation of Governmental Funds Schedule by Source June 30, 2002 2002 GOVERNMENTAL FUNDS CAPITAL ASSETS: Land and. land improvements , 4,830,840 Buildings and structures 4,851,752 machinery and equipment 1,731,302 Infrastructure 98,829,447 Construction in.progress _ 8,988,339 Total governmental funds capital assets 119,231,680 Accumulated depreciation (13,126,264) Total governmental funds capital assets,net $ 106,105,416 INVESTMENTS IN GOVERNMENTAL FUNDS CAPITAL ASSETS BY SOURCE: General Fund $ 109,355,397 Special revenue funds 1,529,826 Capital projects funds 8,295,042 Donations 51,415 Accumulated depreciation (13,126,264) Total governmental funds capital assets $ 106,105,416 81 City of Saratoga Capital Assets Used in the Operation of Governmental Funds Schedule by Function and Activity June 30, 2002 Land and Land Buildings Machinery Improvements and Structures and Equipment Infrastructure FUNCTION AND ACTIVITY General and intergovernmental services: Management services $ - $ 240,458 $ 33,165 $ Administrative services - 167,586 141,777 Intergovernmental services 118,184 3,096,786 79,818 Total general and intergovernmental services 118,184 3,504,830 254,760 Public safety: Police services - - 70,306 Code enforcement - 57,796 Total public safety - - 128,102 Public works: Streets and sidewalks 134,696 30,628 519,879 98,829,447 Parks/open space 2,529,529 92,622 466,922 - Total public works 2,664,225 123,250 986,801 98,829,447 Community services 305,967 1,223,672 271,028 - Community development services 1,742,464 - 90,611 - Total governmental funds capital assets 4,830,840 4,851,752 1,731,302 98,829,447 Accumulated depreciation - (1,763,712) (940,680) (10,421,872) Total governmental funds capital assets,net $ 4,830,840 $ 3,088,040 $ 790,622 $ 88,407,575 82 Construction in Progress Totals $ 30,085 $ 303,708 - 309,363 - 3,294,788 30,085 3,907,859 - 70,306 57,796 - 128,102 545,996 100,060,646 - 3,089,073 545,996 10 3,149,719 1,880,331 3,680,998 6,531,927 8,365,002 8,988,339 119,231,680 - (13,126,264) $ 8,988,339 $ 106,105,416 83 City of Saratoga Capital Assets Used in the Operation of Governmental Funds Schedule of Changes by Function and Activity For the year ended June 30, 2002 Governmental Governmental Funds Capital Funds Capital Assets Inventory Assets July 1,2001 Additions Deletions Adjustments June 30,2002 FUNCTION AND ACTIVITY General and intergovernmental services: Management services $ 536,511 $ 34,054 $ $ (266,857) $ 303,708 Administrative services 553,853 58,389 - (302,879) 309,363 Intergovernmental.services 3,294,788 - - 3,294,788 Total general and intergovernmental services 4,385,152 92,443 - (569,736) 3,907,859 Public safety: Police services 70,306 - - - 70,306 Code enforcement 180,046 16,303 - (138,553) 57,796 Total public safety 250,352 16,303 (138,553) 128,102 Public works: Streets and sidewalks 99,282,240 687,978 90,428 100,060,646 Parks/open space 3,630,626 25,394 (566,947) 3,089,073 Total public works 102,912,866 713,372 (476,519) 103,149,719 Community services 2,979,898 602,489 98,611 3,680,998 Community development services 1,803,659 6,547,963 13,380 8,365,002 Total governmental funds capital assets 112,331,927 7,972,570 (1,072,817) 119,231,680 Accumulated depreciation - (1,529,505) - (11,596,759) (13,126,264) Total governmental funds capital assets,net $ 112,331,927 $ 6,443,065 $ - $ (12,669,576) $ 106,105,416 84 City of Saratoga Government-Wide Expenses - By Function Fiscal Year 2002 s�sou+loci S4,0010,00o �; ,500,OIg1 $3,000,000 $2,50D,ODE1 i 52,000,000 1 51,500,000 $1,000,000 $500,000 (,eneral/ Public Environmental Pubhc Communitv Community Interest on Depreciation Inter- Safety Sevices IVorks Services Development Long-term Expense Governmental Services Debt General/ Environmenta Community Interest on Inter- Public 1 Public Community Development Long-term Depreciation Fiscal Year Governmental Safety Services Works Services Services Debt Expense Total 2002 5 2,005,244 $ 3,653,114 S 650,184 $ 4,476,568 $ 2,120,523 $ 2,025,987 $ 919,625 $ 1,529,505 $ 17,380,650 • The fiscal vear ended June 30,2002 was the fisrt vear that the City implemented GASB Statement No,34. Source: Citv of Saratoga Annual Financial Report 86 City of Saratoga Government - Wide Revenues Fiscal Year 2002 S7,10 1(l,000 Sh,1 1,000 $5,000,000 I I 54,000,000 i $3,00o,o00 S2,00(:,000 , $1,00C,90o Charges Operating Capital Taxes Motor Investment Miscellaneous IQ, Grants and Grants and Vehicle Earnings Services Coritributions Contributions In-lieu Fees Program Revenues Cenerai Reve11ueS Charges Operating Capital N10tor for Grants and Grants and V"elncle Irivestment Fiscal Year Services Contributions Contributions Taxes In-lieu Fees Earnings Miscellaneous 'r'otai 2002 $ 5,972,829 S 1,907,648 $ $ 7,298,947 $ 1,807,802 $ 878,734 S 754,252 $ 15,614,212 * The fiscai year ended June 30,200-1 was the first year that the Cite implemented GASB Statement No.34. Source: City of Saratoga Annual Financial Report 87 City of Saratoga General Fund Expenditures - By Function Last ten fiscal years $4,000,000 $3,500,000 - $3,000,000 ---- $2,500,000 ; - --... .__....__. $2,000,000 - - - - $1,500,000 -- -- $1,000,000 - - $500,000 19y3 14 1995 1996 1997 1998 1999 2000 2001 2002 ■General/Intergovernmental ❑Public Safety ❑Environmental Services ❑Public Works ■Community&Development Services ❑Capital Outlay General/ Inter- public Development Public Community Capital Fiscal Year Governmental Safety Services Works Services Outlay Totals 1993 $ 2,139,162 $ 2,523,782 $ 645,466 $ 1,896,690 $ 786,702 $ 601,792 $ 8,593,594 1994 1,515,310 2,119,313 801,058 1,258,065 209,890 240,882 6,144,518 199-9 2,698,219 2,411,207 Y07,232 2,587,008 234,788 531,607 8,370,061 1996 1,819,188 2,322,425 1,098,931 1,444,155 177,837 154,695 7,017,231 1997 279,737 2,616,973 1,616,532 2,697,413 349,0iy 280,500 7,840,174 1998 1,074,696 2,598,233 65,502 877,204 179,92$ 226,310 5,021,873 1999 1,754,995 2,581,940 30,947 712,822 72,880 212,223 5,365,807 2000 1,404,530 2,761,741 129,849 1,113,870 172,549 578,612 6,161,151 2001 1,574,597 3,062,160 140,883 1,349,838 262,696 651,814 7,041,988 2002 1,943,301 3,570,910 111,520 1,378,334 465,241 614,171 8,083,477 Source: City of Saratoga Annual Financial Report 88 City of Saratoga General Fund Revenues - By Source Last ten fiscal pears $3,000,000 .I $2,500,000 --.. -- $2,000,000 i $1,500,000 - -- - - i $1,000,000 $500,000 - 1 1994 1995 1996 1997 1998 1999 2000 2001 2002 ■Property Taxes ❑Other Local Taxes ❑intergovernmental ❑Franchise Fees ■Use of Money and Property 0Current Service Charges Current Property Other lnter- Franchise Use of Money Services Fiscal Year Taxes— Local Taxes governmental Fees and Property Charges Totais 1y94 $ 1,045,975 $ 2,338,826 $ 1,02y,463 S 758,611 $ 183,061 $ 1,587,425 $ 6,943,361 1y95 1,221,096 2,434,070 1,064,052 707,822 272,425 1,996,874 7,696,339 1y96 1,546,162 2,965,069 1,152,968 669,467 343,295 2,036,854 8,713,815 19y 2,142,454 2,424,825 1.,301,443 685,083 665,966 2,552,050 9,771,821 19y8 1,664,144 2,202,826 1,392,591 772,258 457,382 2,037,182 8,526,383 1999 1,864,:766 2,328,071 1,6S0,670 777,560 472,198 1,705,692 8,82S,a57 2000 2,790,294 2,718,358 1,623,583 886,618 630,833 2,005,18.3 10,654,8L�11 2001 2,065,051 2,938,209 1,725,765 876,652 930,430 1,962,12:2 10,498,220 2002 2,772,021 2,067,288 1,901,892 1,010,609 216,562 2,54ti,937 10,515,309 Source; Citv of Saratoga Annual Financial Report 89 City of Saratoga Property Tax Levies and Collections Last ten fiscal years 7,000,000,000 1 $3,Oo0,0o0 6,000,000,000 7,000,000,0oa $],50O,000 =------ -- 4,000,000,000 ....-- - - ---- $1,000,000 3,000,000,000 $500,000 —------ j 2,000,000,000 s0 -_ -- 1,000,000,000 0r a. a`. CI. T c H °: 0 - ------ — - - a cr, a rn a,Cc a, C, c o —�—Tax Levied ° a; N N N —�—Seriesl Property Tax Value of Property Fiscal Levies and Subject to Local Year Collections Tax Rate 1993 $ 991,862 $ 2,996,971,420 1994 1,045,975 3,181,662,768 1995 1,221,096 3,289,435,553 1996 1,546,162 3,398,224,679 1997 2,142,454 3,697,796,461 1998 1,664,144 4,029,381,944 1999 1,864,766 4,432,656,416 2000 2,790,294 4,823,743,087 2001 2,065,051 5,331,749,683 2002 2,772,021 6,271,461,110 Sources: City of Saratoga Annual Financial Report California Municipal Statistics Inc.(1990-1992) County of Santa Clara Tax Rates and Information Publication(2001-2002) 90 City of Saratoga General Fund Tax Revenue Last ten fiscal years $6,000.000 I $5,000,000 $4,000,000 S3,000,000 , s $2,000,000 < -- I $1,000,000 - — — 1993 1994 199-9 1.996 1997 1p98 1999 2000 2001 2002 ❑Utility Users'Tax ®Property Tax(2) ❑Sales Tax ❑Other Taxes(1) Fiscal Utility Year User's Tax Property Tax (2) Sales Tax Other Taxes(1) Totals .1993 $ 735,562 $ 991,862 $ 910,834 $ 533,604 $ 3,171,862 1.994 715,239 1,045,975 958,436 665,1.51 3,384,801 1995 725,373 1,221,096 872,134 836,563 3,655,166 .1996 729,468 1,546,162 896,799 1,338,802 4,.51.1,231 1997 112,464 2,142,454 966,900 1,145,461 4,567,279 1998 - 1,664,144 1 j"57,677 1,145,149 3,866,970 '1999 - 1,864,766 971+,192 1,348,s79 4,192,837 ' 2000 - 2,790,294 1,01,122 1,647,236 5,508,652 ' 2001 - 2,065,051 1,255,726 1,682,483 5,003,260 2002 - 2,772,021 1,006,607 1,000,681 4,839,309 Year 2000 property tax receipts include settlement proceeds. (l) Other Taxes include: Transient Occupancy Tax, Real Property Transfer Tax, Construction Tax, Business License Tax. 2002. Statement of Revenue, Expenditures, & Changes in Fund Balance classifies License as a fee associated J�Tith actn'ity. For comparative purposes,the inclusion of 2002 Business Licenses would total 51,276,043. (2) Property Tax levy's are remitted in full by Santa Clara County which handles delinquencies and retains all interest and penalties. Source: City of'Saratoga Finance Department 91 City of Saratoga Assessed and Estimated Actual Market Value of Taxable Property Last ten fiscal years $7,000,000,000 $6,000,000,000 $5,000,000,000 — a - $4,000,000,000 $3,000,000,000 i i $2,000,000,000 - - - t IL $1,000,000,000 1993 1994 1995 1996 1.997 1998 1.999 2000 2001 2002 ❑Secured Property ■Unsecured Property Fiscal Secured Unsecured Total Estimated Year Property Property Assessed Market 1993 $ 2,966,543,181 $ 30,428,239 $ 2,996,971,420 $ 2,996,971,420 1994 3,153,176,308 28,486,460 3,181,662,768 3,181,662,768 1995 3,261,741,964 27,693,589 3,289,435,553 3,289,435,553 1996 3,363,964,334 34,260,345 3,398,224,679 3,398,224,679 1997 3,660,513,753 37,282,708 3,697,796,461 3,697,796,461 1.998 3,990,741,994 38,639,950 4,029,381,944 4,029,381,944 1999 4,392,456,823 40,199,593 4,432,656,416 4,432,656,416 2000 4,789,325,625 34,417,462 4,823,743,087 4,823,743,087 2001 5,292,676,050 39,073,633 5,331,749,683 5,331,749,683 2002 6,227,826,411 43,634,699 6,271,461,110 6,271,461,110 Source: California Municipal Statistics Inc. The California Constitution requires properties to be assessed at full market value on the date or purchase but limits increases in assessed valuation to 29%annually. 92 City of Saratoga Property Tax Rates (Per $100 of Assessed Valuation) - All Overlapping Governments Last ten fiscal years 1.2000 I i 1.0000 -- i 0.8000 I 0.6000 I a 0.4000 I I ; 0.2000 i I i 1993 1994 1995 1996 1997 1 1999 2000 2001 ❑Basic County Wide Levy ■School Districts ❑Special Districts&Other Fiscal Basic County School Special Districts Year Wide Levy Districts and Other l y9:i 1.0313 0.0165 1994 1.0305 - 0.01t�5 1995 1.0332 0.0903 0,0180 1906 1.0338 0.1170 0.0147 1 yy�, 1.0365 0.0743 0.0102 1998 1.0412 0.0415 0.0098 19yC' 1.0405 0.0647 0.0082 2000 1.0343 0.0612 0.0085 2001 1.0380 0.0745 0.0075 2002. 1.0388 0.0711 0.0062 Source: California Municipal Statistics Inc. 93 City of Saratoga Special Assessment Billings and Collections Last ten fiscal years $200,000 $180,000 $160,000 $140,000 $120,000 ' $100,000 $80,000 $60,000 � ----- _ .. ___.._ S40,000 1 -- $20,000 $- L-- 1993 1994 t1996 1997 1998 1999 2000 2001 2002 ❑Special Assessment Special Assessment Fiscal Billings and Year Collections 1993 $ 180,068 1994 176,280 1995 154,097 1996 104,292 1997 83,101 1998 102,164 1999 55,505 2000 157,936 2001 95,973 2002 101,162 Source: City of Saratoga Annual Financial Report Comprises Parking Districts#1 and#4 and Lighting and Landscaping District#1 in 1992-1998 Prior years also include Parking Districts#2 and#3 94 City of Saratoga Ratio of General Obligation Bonded Debt to Assessed Value and Bonded Debt Per Capita Fast ten fiscal years i x;�,[lao,otm,uor_3 5600 $5.000,000,000 $4,000,00(},{100 $40U -- --- .. 53,ODil.Uf)o,000 - --_ $300 .._.... $^_,11()0,0()0,000 - I $200 - - . . — $100 -- ^_ o cr �r c ac o. r J �- .a- N N N N 0' T. 0, 0' 0' Qom` O p OD --• - -- ,-- r •.- N N rV Assessed Value A Net Bonded Debt Per Capita Net Bonded Fiscal Assessed Bonded Debt Year _ Population Value Debt Per Capita 1993 28,390 5 2,996,971,420 $ 670,000 5 24 1994 28,709 3,181,662,768 615,000 21 1995 29,576 3,289,435,553 555,000 19 1996 29,579 3,398,224,679 490,000 17 1997 3(1,591 3,697,796,461 415,000 14 1998 31,097 4,029,381,944 340,000 11 1999 31,255 4,432,656,416 265,000 8 2000 31,320 4,823,743,087 185,000 6 2001 29,$43 5,331,749,683 15,100,000 506 2002 30,444 6,271,461,110 15,U00,000 493 Sources: County of Santa Clara Tax Rate and Information Publication California Municipal Statistics Inc. Note: Includes Library Bonds only 95 City of Saratoga Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Fund Expenditures - Last ten fiscal years 9.00% p0 ----------- 7.00% j ------------------ 4.00% - - - -- - --- - ------ --- - -------- ------------- 2.00°6 - -1,00% ---------- G.00% -- --- ------- -- -------- a.00% ------- 1993 1994 1995 1996 1997 1998 1999 2000 200] 2002 ❑Debt Service Percent of Total Debt Service to Fiscal Total General Fund General Fund Year Principal Interest Debt Service Expenditures Expenditures 1993 $ 50,000 $ 42,523 $ 92,523 $ 8,593,594 1.08% 1994 55,000 36,590 91,590 6,144,518 1.49% 1995 60,000 33,644 93,644 8,370,061 1.120/, 1996 65,000 30,307 95,307 7,017,231 1.360X, 1997 75,000 26,700 101,700 7,840,174 1.30% 1998 75,000 22,178 97,178 5,021,873 1.94%� 1999 75,000 18,071 93,071 5,365,907 1.73% 2000 80,000 18,783 98,783 6,161,151 1.60% 2001 85,000 9,774 94,774 7,041,988 1.35`11�1 2002 99,973 592,462 692,435 8,083,477 8.57% Includes General Obligation Bonds Source: City of Saratoga Finance Department 96 City of Saratoga Demographic Statistics Last ten fiscal years, 32,000 1,750,000 31,000 ! .... ---.._... .. —- _ ! 1,700,000 --- ---- --- 30,000 - -- - -.. — --. 1,650,000 -... -- ... ... - 29,001) --.... ..-- - 1,600,000 _ I 28,000 -- — —.... ...._— . ----- --- 1,550,000 — — — - 1,450,(}00 2b;00p l L a M c. a s c = c a`Y< a a a cc r c -+ [V N N ©! i Cty Population ■Santa Clara County Population 1! --t Santa Clara City Fiscal Citv Countv Population Year Population Population "X.of County 1993 28,390 1,559,755 1994 28,709 1,587,768 1995 29,576 1,607,673 1996 29,579 1,612,258 1.S3"4, 1997 30,591 1,653,061 1998 31,097 1,689,908 1.5 ° 1.999 31,255 1,715,374 2000 31,320 1,736,722 1-80111 200', 29,843 1,682,585 1771i-1 2002 30,444 1,719,565 Source: State of California Department of Finance-Population Research Unit 97 City of Saratoga Property Values, Remodeling and Construction Last ten fiscal years i $7,000,000,000 $7,000,000 $6,000,000,000 $6,000,000 s_,000,noo,0no 55,000,000 155 -- _ $�,000,000,nnn $4,000,000 S3,000,000 ' $2,000,000 - $1,000,000,000 - $1,000,000 - $ — -- S �. . 199 1994 1995 1996 1997 199,s1999 2000 2001 2002 1993 1995 1997 1y99 2001 i ®Property Values 0 Residential Remodeling&Construction $70,000,000 5450,000,000 ., ..._.... -.__._. 560,000,000 — — -- — $400,000,000 $350,000,000 ---- — — — 550A00,ODO $300,000,000 $40,000,000 — — — $250,000,000 -- $30,000,000 — — S200,000,000 — — $20,000,000 $150,()00,000 — $1DO,OUO $10,000,000 - ' - - - $50,ODO ODD .l, `1993 1994 1995 1996 1997 1998 1999 2000 2001 $ 1993 1995 7997 1999 2001 ■Commercial Remodeling&Construction i]Bank Deposits Commercial Remodeling Residential Remodeling and Construction and Construction Fiscal Property Number Number Bank Year Values of Permits Value of Permits Value Deposits 16393 $ 2,996,971,420 67 $ 547,502 2,481 $ 26,151,346 $ 292,516,000 1994 3,181,662,768 94 1,509,805 2,653 23,020,867 304,441,000 1995 3,289,224,679 57 1,147,719 3,194 35,922,169 304,179,000 1996 3,398,224,679 69 1,171,533 2,535 66,013,893 331,014,000 1997 3,697,796,461 52 843,020 1,834 44,982,977 343,9S2,200 194E 4,029,381,944 47 5,300,593 1,844 48,230,194 376,130,000 1999 4,432,656,416 66 6,383,068 1,916 66,218,156 391,733,000 2000 4,823,743,087 57 4,362,875 1,960 65,901,107 446,758,000 2001 5,331,749,683 61 1,438,538 1,631 68,500,341 N/A 2002 6,271,461,110 42 1,405,295 1,685 53,474,165 N/A Source: Cite of Saratoga Finance Department Bank deposits from Findley Reports and Sheshenoff Information Services 98 City of Saratoga Computation of Legal Debt Margin June 30, 2002 Assessed value $ 6,271,461,1.1.0 Bonded debt limit(15"'0 of assessed value) $ 940,719,167 Amount of debt subject to limit: Total Ion—term debt 15,000,000 Legal debt margin $ 9,55,719,167 Source: City of Saratoga Finance Department 99 City of Saratoga Computation of Direct and Overlapping Debt June 30, 2002 Percentage Amount Applicable Applicable to City of to City of Saratoga Saratoga DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: Santa Clara County Flood Control and Water Conservation District Zone NC-1 12.126% $ 55,173 Santa Clara County Flood Control and Water Conservation District Zone W-1 3.852 315,479 Foothill-De Anza Community College District 1.741 1,714,102 Campbell Union High School District 5.374 3,230,700 Fremont Union High School District 3.602 3,336;533 Los Gatos Joint Union High School District 40.834 30,737,794 Campbell Union School District 7.446 4,844,242 Cupertino Union School District 6.324 6,058,392 Moreland School District 13.433 4,843,849 Saratoga Union School District 85.520 33,916,525 Midpeninsula Regional Open Space Park District - - Saratoga Fire Protection District 97.402 5,794,189 City of Saratoga 100.000 15,000,000 City of Saratoga 1915 Act Bonds 100.000 500,000 Total Gross Direct and Overlapping Tax and Assessment Debt 110,346,978 Less:Santa Clara County FC and WCO,Zone NC-1 (100%self supporting) 55,173 Total Net Direct and Overlapping Tax and Assessment Debt $ 110,291,805 DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT: Santa Clara Coun tv General Fund Obligations 3.6455'0 17,430,937 Santa Calra Countti Board of Education Certificates of Participation 3.645 674,325 Foothill-De Anza Community College District Certificates of Participation 1.741 470,505 West Valley Community College Districts certificates of Participation 11.094 2,140,033 Los Gatos-Saratoga joint Union High School district Certificates of Participation 40,834 1,976,366 Campbell union School District Certificates of Participation - - Cupertino Union School District Certificates of Participation 6.324 520,149 Moreland School District Certificates of Participation 13.433 801,278 Saratoga Union School District Certificates of Participation 85.520 6,841,600 Midpeninsula Regional Open Space Park District Certificates of Participation 6.329 7,000,518 Santa Clara Valley Water District Certificates of Participation 3.645 7,275,420 Santa Clara County Central Fire District Certificates of Participation 14.609 37,913 Total direct and overlapping general fund obligation.debt $ 45,169,044 Gross combined total debt $ 155,516,022 (1) Net combined total debt $ 155,460,849 (1) Excludes tax and revenue anticipation notes, revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligation. Ratios to assessed valuation: Direct debt$185,000 0.24% 1 otal gross debt and overlapping tax and assessment debt 1.760% Total net direct and overlapping tax and assessment debt 1.76% Gross combined total debt 2.48% Net combined total debt 2.48% Source: California Municipal Statistics,Inc. 100 City of Saratoga Principal Taxpayers June 30, 2002 Percent of .Assessed Total Assessed Assessee Use V alue Value Saratoga Office Center Partners LLC Office building $ 32,640,000 0 i7°,, SanJosE�Water Works Water Company 12,974,043 0.2:1e0 Hayfield House LLC Single Family Residence 12,648,720 Q?0n Sabrato Construction Corporation Vacant 11,516,900 .Howell& McNeil Development LLC Single family residential I1,220,000 Harvey L.Armstrong,Trustee Vacant 10,200,000 0.1645, Michael T.LaBarbera Shopping center 10,098,104 0.16 Paul L. Hulme,Trustee Single family residential 9,712,362 0.1�;'s_, David J..Morrison,Trustee Office building 8,833,348 0.14%, Public Storage Properties IX Inc. Warehousing 8,048 171 0 13% John and Karean Chapmar. Single family residential 8,000,000 0.130G, Peter and June Cartwright Single.family residential 7,752,433 Q 12V Jann.ie 1'.Wu,Trustee Single family residential 7,027,700 Robert H.SHTan.son,Jr.,'Trustee Single family residential 6,8D9 240 0.]1°4, Armin Nikfar.,Trustee Single family residential 6,807,513 0.11°4, D.A. and Walter S.Pienkos,Jr. Single family residential 6,680,000 Tsu-Mu and Catherine Lin Single family residential 6,672,336 0 11% John A.and Heidi L.Manger,Trustee Single family residential 6,630,000 0.11°'0 Douglas N. Bryan,'Trustee Single family residential 6,328,000 0.1{)1% Edward and Deloise A.Jordan,Trustee Single family residential 6,511,184 0.10%, Totals $ 197,310,054 3.1.711& Total assessed valuation $ 6,227,826,411 Source:California Municipal Statistics,Inc 1.D] City of Saratoga Miscellaneous Statistics June 30, 2002 Date of Incorporation 1956 Form of Government Council-Manager Employees: Public Safety 2 City manger's office 6 Recreation 10 Public works /maintenance 22 Community development 12 Administrative services 10 Total employees 62 Area 12 square miles Miles of Streets 150 Length of Storm Drains 45 miles Fire Protection: Saratoga Fire District: Number of stations 1 Number of firefighters 24 Number of reserve firefighters 15-20 Central Fire District: Number of stations 2 Number of firefighters 18 Number of reserve firefighters 40 Police Protection: Number of stations 1 Number of police officers 62 Number of support personnel 6 Water Utility: San Jose Water Company: Number of meters 10,038 Average daily consumption 393 gallons per household Length of water mains 133 miles Length of storm drains 45 miles Sewer: West Valley Sanitation District: Number of connections 8,461 Length of sewer lines 123 miles Cupertino Sanitation District: Number of connections 2,083 Length of sewer lines 35 miles Culture and Recreation: Parks 15 Acres in parks 81 acres Taxable Sales $ 106,606,683 Registered Voters 18,563 Population 30,444 Sources: Various City records 102 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 14. IMPLEMENTATI:ON OF GASB PRONOUNCEMENTS AND PRIOR PERIOD ADJUSTMENTS The City has recorded the implementation of new GASB pronouncements. Accordingly, the City's equity as of July 1, 2001 has been restated as follows: Equity, Implementation As Previously of New GASB Equity, Re orted Pronouncements as restated_ Government-Wide Financial:Statements: Government activities $ 32,958,130 $ 84,389,403 "$ 11�,34%,533 With the implementation of new GASB pronouncements, the capital assets including infrastructure, long-term debt, and interest payable were recorded in the Government-Wide Financial Statements; however, these were not recorded in the Fund. Financial Statements. 60 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30,2002 12. COMMITMENTS AND CONTINGENCIES A. Lawsuits The City is presently involved in certain matters of litigation that have arisen in the normal course of conducting City business. City management believes, based upon consultation with the City Attorney, that these cases, in the aggregate, are not expected to result in a material adverse financial impact on the City. Additionally, City management believes that the City's insurance programs are sufficient to cover any potential losses should an unfavorable outcome materialize. B. Federal and State Grant Programs The City participates in Federal and State grant programs. These programs are audited by the City's independent accountants in accordance with the provisions of the Federal Single Audit Act Amendments of 1996 and applicable State requirements. No cost disallowance is expected as a result of these audits; however, these programs are subject to further examination by the grantors. 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 inunaterial. As of June 30, 2002, 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. 13. SUBSEQUENT EVENTS Early May 2002, the City issued a non-refundable good faith purchase deposit of $135,000 for the application to bid on a property owned by the Grace Methodist Church. The cost of the property, now known as the North Campus, was purchased for$4.5 million utilizing $1 million from a Hillside CIP reserve and $3.5 million from unallocated General Fund reserves on July 18, 2002. The following options were considered for potential use of the property: 1. Move Senior Center programs to new site and move Sheriff's Office to current Senior Center. 2. Demolish sanctuary and education buildings and use portable from library for community meeting space and recreation use. 3. Demolish sanctuary and education buildings, purchase library portable and move Sheriff's Office in portable on Church property. 4. Renovate administration building only, for office, recreation and community meeting room usage, deferring the rehabilitation of other buildings on the site. 5. Demolish existing buildings on the property and provide grass and irrigation for open space and sports league practice. 6. Mothball existing buildings and utilize open space for a day use park. 59 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 10. RETIREMENT PLANS, Continued Pension Plan, Continued Annual Pension Cost -- For fiscal year 2001-2002, the City's annual pension cost of $241,114 for PERS was equal to the City's required and actual contributions. The required contribution was determined as part of the June 30, 2000 actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions included (a) 8.25% investment rate of return (net of administrative expenses), (b) projected annual salary increases ranging from 3.75% to 14.2% for miscellaneous employees depending on age, service, and type of employment, and (c) 2% per year cost-of-living adjustments. Both (a) and (b) included an inflation component of 3.5%. The actuarial value of PERS assets was determined using techniques that smooth the effects of short-term volatility irl the market value of investments over a three-year period. PERS 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, 2000, was 30 years for miscellaneous employees. THREE-YEAR TREND INFORMATION FOR PERS Annual Percentage of Pension Cost APC Net Pension Fiscal Year (APC) _ Contributed Obligation 6/30/00 $ 177,433 100 $0 6/30/01 188,080 100% 0 6/30/02 241,114 100% 0 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. 58 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 9. RISK MANAGEMENT,Continued 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 for the fiscal year ended June 30, 2001: Total assets $ 33,366,139 Total liabilities $ 15,749,511 Fund equity $ 17,616,628 Total revenues $ 1,430,000 Total expenses $ 1,472,804 Net increase in fund equity $ (42,804) Audited financial information for each risk pool may be obtained from ABAG at P. O. Box 2089,Oakland,California 94604-2089. 10. RETIREMENT PLANS Pension Plan Plan Description - The City contributes to the California Public Employees Retirement System (PERS), an agent multiple-employer public employee defined benefit pension plan_ PERS provides retirement and disability benefits, annual cast-of-living adjustments, and death benefits to plan members and beneficiaries. PERS acts 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 PERS' annual financial report may be obtained from. their Executive Office located at 400 P Street, Sacramento, California 95814. Fyndir g Policy - Active plan members are required by state statute to contribute for miscellaneous employees 7% of their annual covered salary. The City_ employer makes the contributions required of City employees on their behalf and for their account, which amounted to $239,614 for the year ended June 30, 2002. The City employer is required to contribute for fiscal year 2001-2002 at an actuarially determined rate of 0% of annual covered payroll for miscellaneous employees. 57 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 9. RISK MANAGEMENT The City participates in the following public entity risk pools: ABAG Plan Corporation (ABAG PLAN) covers general liability claims in an arnount up to $7,000,000. 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, 2002, the City contributed $88,195 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 claims up to the statutory limit. The City has no deductible for these claims. During the fiscal year ended June 30, 2002, the City contributed $166,255 for current year coverage. The City's contributions to each risk pool equal the ratio of the City's payroll to the total payrolls of all entities participating in the same layer of each program, in each. program- year. Actual surpluses or losses are shared according to a formula developed from overall loss costs and spread to member entities on a percentage basis after a retrospective rating. There have been no significant reductions of insurance settlements that exceeded insurance coverage for the past three years. The workers' compensation and general liability claims payable of $100,000 reported at June 30, 2002, 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 liability amounts were as follows: Year Claims CIaims and Claims Ended Payable Changes in Claims Payable June 30, JuIy 1 Estimates Pavments June 30 2000 $ 100,000 $ 6,530 $ (6,530) $ 100,000 2001 100,000 15,279 (15,279) 100,()00 2002 100,000 32,061 (32,061) 100,000 56 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 8. RESERVED AND DESIGNATED FUND BALANCES Fund balances at June 30, 2002, have been reserved and designated for the following purposes: Special Debt Capital General Revenue Service Projects Fund Funds Fund Funds Totals Reserved for: Encumbrances $ 164,713 $ 153,975 $ - $ 786,101 $ 1,104,789 Deposits 135,000 - - - 135,000 Petty cash 300 - - - 300 AT&T settlement 16,103 - - - 16,103 Debt service - - 554,076 - 554,076 Advances to other funds 137,111 - - - 137,1"11 Total reserved 453,227 153,975 554,076 786,101 1,947,379 Designated for: Unrealized investment gain 54,040 - - 10,157 64,197 Operations 2,316,262 - - - 2,316,262 PERS 104,751 - - - 104,751 MTS 165,000 - - - 165,000 Total designated 2,640,053 - - 10,157 2,650,210 Unreserved,Undesignated 3,876,398 4,950,923 - 14,743,936 23,571,257 Total fund balances $ 6,969,678 $ 5,104,898 $ 554,076 $ 15,540,194 $ 28,168,846 55 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 6. LONG-TERM DEBT, Continued Claims Payable At June 30, 2002, the claims payable has been accrued. See Note 10 Risk Management for more information. The total amount of the claims payable was $50,000 at June 30, 2002. Compensated Absenees The City's liability for vested and unpaid compensated absences (accrued vacation and sick pay) has been accrued and amounts to $315,977at June 30, 2002. 7. NON-CITY OBLIGATIONS The following bonds bearing the City s name were issued to finance redevelopment projects; however, neither the faith and credit nor the general taxing power of the City has been pledged to the payment of the bonds. Furthermore, the City has no obligation for the payment of the bonds in the case of default. Therefore, the following obligations are not included in the accompanying basic financial statements. Original Outstanding at Amount June 30,2002 Parking Assessment Districts#2 and#3 $ 1,244,900 $ 440,000 Leonard Road Improvement Assessment District 101,686 70,000 Saratoga Public f-inancing Authority 1993 Revenue Bonds -1,600,000 660,000 The City is the collecting agent for Village Parking Assessment Districts #2 and #3 and the Leonard Road. Improvement District, but is not obligated for the repayment of debt issued. by these Districts. As a result, these Districts have not: been included in the basic financial statements of the City. 54 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 6. LONG-TERM DEBT, Continued 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% to 6% 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, 2032 and are subject to redemption prior to maturity, at redemption prices ranging from 100% to 101% of par. The bonds may be called for redemption beginning on or after August 1, 2011, at the option of the City. At June 30, 2002, the outstanding balance of the bonds was$15,000,000. The annual debt service requirements on these bonds are as follows: For the Year Ending June 30, Principal Interest Totals 2003 $ 60,000 $ 783,756 $ 843,756 2004 245,000 776,131 1,021,131 2005 255,000 763,631 1,018,631 2006 270,000 750,506 1,020,506 2007 280,000 736,756 1,016,756 2008-2012 1,655,000 3,411,930 5,066,930 2013-2017 2,140,000 2,891,280 5,031,280 2018- 2022 2,555,000 2,309,550 4,864,550 2023-2027 3,290,000 1,564,011 4,854,011 2028-2032 4,250,000 580,651 4,830,651 Totals $ 15,000,000 $ 14,568,202 $ 29,568,202 53 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 6. LONG-TERM DEBT A summary of the City's long-term debt transactions for the year ended June 30, 2002, is presented below. Classification _ Amounts Amounts Balance Balance Due Within Due in More Description _ July 1,2001 Additions Retirements June 30,2002 One Year _ than One Year General Obligation Bonds: 1976 Library Bonds $ 1,00,000 $ - $ (100,000) $ - $ - $ - 2001 Library Bonds 15,000,000 - - 15,000,000 60,000 14,940,000 Claims Payable 50,000 - - 50,000 - 50,000 Compensated Absences 131,950 184,027 - 315,977 221,184 94,793 'Totals $ 15,281,950 $ 184,02' $ ('100,000) $ 15,3e5,977 5 2S1,184^ $ 15,084,793 General Obligation 1976 Library Bonds - Original Issue$1,200,000 On December 15, 1976, the City issued General Obligation 1976 Library Bonds of $1,200,000. The proceeds of the bonds were used to construct a library and associated site improvements which are leased to County of Santa Clara. Lease revenues received from the County are pledged for repayment of the bonds. Interest on the bonds is payable on June 15 and December 15 of each year, at 5% to a maximum of 7%. Principal is due annually on December 15. The bonds mature on December 15, 2001. At June 30, 2002, the General Obligations 1976 Library Bonds were paid in full. 52 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 5. CAPITAL ASSETS Capital assets activity for the year ended June 30, 2002, consisted of the following: Primary Government Balance Inventory Balance July 1,2001 Additions Retirements Adjustments June 30,2002 Governmental Activities: Capital assets,not being depreciated: Land and land improvements $ 4,797,848 $ - $ - $ 32,992 $ 4,830,840 Construction in progress - 7,585,193 - 1,403,146 8,988,339 Infrastructure: Street payment system 45,182,765 - - - 45,182,765 Totals capital assets, not being depreciated 49,980,613 7,585,193 - 1,436,138 59,001,944 Capital assets,being depreciated: Buildings and structures 6,176,179 - - (1,324,427) 4,851,752 Machinery and equipment 2,537,454 378,375 - (1,184,527) 1,731,302 Infrastructure: Bridges 1,554,653 9,001 - - 1,563,654 Signs and lights 762,527 - - - 762,527 Drainage system 39,844,721 - - - 39,844, 21 Sidewalks 11,475,780 - - - 11,475,780 Totals capital assets being depreciated 62,351,314 387,376 - (2,508,954) 60,229,736 Accumulated depreciation - (1,529,505) - (11,596,759) (13,126,264) Totals capital assets, being depreciated,net 62,351,314 (1,142,129) - (14,105,713) 47,103,472 Governmental activities capital assets,net $ 112,331,927 $ 6,443,064 $ - $ (12,669,575) $ 106,105,416 Depreciation expense for the depreciable capital assets was $1,529,505 in 2002. 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. 51 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 4. INTERFUND TRANSACTIONS, Continued B. Long-Term Advances At June 30, 2002, the City had the following long-term advances: Advances From Other Funds Community Development Block Grant Special Advances To Other Funds Revenue Fund General Fund $ 137,111 The advances were used for cash flow purposes and will be repaid as cash becomes available within. the Community Development Block Grant Special Revenue Fund. However, there are no set dates for repayment. C. Operating Transfers Operating transfers for the year ended June 30, 2002 were as follows: Operating Transfers Out Park Development General Capital Operating Transfers In Fund :Projects Fund Totals Capital Projects Funds: Streets and Roads $ 1.,689,999 :3 - $ -1,689,999 Capital Improvement 5,295,000 250,990 5,545,990 Special Revenue Fund: Recreation 551,953 - 551,953 Total $ 7,536,952 250,990 $ 7,787,942 The above operating transfers resulted from the normal course of the City's operation. 50 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 3. LOANS RECEIVABLE At June 30, 2002, the City had the following loan receivable: Housing Rehabilitation Loan Program $ 455,561 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, 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. At June 30, 2002, the City had outstanding SHARP loans of $455,561. During the year ended June 30, 2002, the City received$56,748 in repayments from all participants. 4. INTERFUND TRANSACTIONS A. Due to/from Other Funds At June 30, 2002, the City had the following due to/ other funds: Due To Other Funds Transportation Development Due From Other Funds Act General Fund $ 9,142 The above due to/from other funds were short-term receivables or payables in the normal course of the City's operation. 49 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30,2002 2. CASH AND INVESTMENTS, Continued D. Surninary of Cash and Investments, Continued Deposits and investments were categorized as follows at June 30, 2002: Not Required Category to be Fair 1 Cate Torized Value City Treasury: Demand Deposits; Cash deposit $ 3,578,350 $ - $ 3,578,35D Certificates of deposit 1,136,542 - 1,136,542 Total demand deposits 4,714,892 - 4,714,892 Investments: Local agency investment fund - 19,492,008 19,492,008 Total investments - 19,492,008 19,492,008 Total deposits and investments 4,714,892 19,492,008 24,206,900 (ash and Investments with Fiscal Agents: Cash deposits 1,1.67,705 - 1,167,705 Money market mutual funds - 165,163 165,163 Guaranteed investment contract 160,000 160,000 Local agency investment fund - 3,663,433 3,663,433 Total cash and investments with fiscal agents 1,167,705 3,988,596 5,156,301 Totals $ 5,882,597 $ 23,480,604 S 29,363,201 At June 30, 2002, the City had no category 2 or 3 deposits or investments. E. Sumfnary of Cash and Investments to Maturity Pooled cash and investments grouped by maturity date at June 30, 2002, are shown below: Maturity Fair Value Current to one year $ -14,206,900 48 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 2. CASH AND INVESTMENTS, Continued C. Credit Risk, Continued Investments Categonj I - Insured or registered or securities held by the entity or its agent in the entity's name. Categoonl 2 - Uninsured and unregistered, with securities held by the counterparty's trust department or agent in the entity's name. Categori 3 - Uninsured and unregistered, with securities held by the counterparty, or by its trust department or agent, but not in the entity's name. Investments Not Subject to Categorization - Investments in the California Local Agency Investment Fund (LA1F) are not categorized, as GASB No. 3 does not require categorization of investment pools managed by another government. Certain fiscal agent investments are not categorized because the underlying assets are open-ended mutual funds. Guaranteed investment contracts are not categorized because they are direct contractual investments and are not securities. All such investments are not required to be categorized under interpretive guidelines issued by the GASB. D. Surnmairy of Cash and Investments The following is a suininary of pooled cash and investments and restricted cash and investments at June 30,2002: Government-Wide Fiduciary Funds Statement of Net Assets Statement of Governmental Activities Net Assets Totals Pooled cash and investments $ 18,646,024, $ 734,964 $ 19,380,988 Restricted cash and investments 9,656,985 325,228 9,982,213 Totals $ 28,303,009 $ 1,060,192 $ 29,363,201 47 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 2. CASH AND INVESTMENTS, Continued B. Investments, Continued The City's investments with Local Agency Investment Fund (LAIF) at June 30, 2001, 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 CMOs) or credit card receivables. As of June 30, 2002, the City had $19,492,008 invested in LAIF as cash and investments and $3,663,433 invested in LAIF as restricted cash and investments, which had invested 3.086% of the pool investment fronds in Structured. Notes and Asset-Backed Securities. The LAIF fair value factor of 1.002780144 was used to calculate the fair value of the investments in LAIF. C. Credit Risk Governmental Accounting Standards Board Statement No. 3 requires that deposits and investments be classified by credit risk. Classifications of deposits and investments by credit risk are as follows: Deposits Categonj T - Insured or collateralized with securities held by the entity or by its agent in the entity's name. Category 2 - Collateralized with securities held by the pledging financial institution's trust department or agent in the entity's name. CatEgonL- Deposits which are uninsured or uncollateralized.. 46 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 2. CASH AND INVESTMENTS, Continued A. Cash Deposits, Continued 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 in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in the City's name. The market value of pledged securities must equal at least 110% 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% of the City's total cash deposits. The City may waive collateral requirements for cash deposits which are fully insured up to $100,000 by the Federal Deposit Insurance Corporation. The City, however, has not waived the collateralization requirements. 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 earned on pooled cash and investments is allocated on an accounting period basis to the various funds based on the period-end cash and investment balances. 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 has complied with the provisions of GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investments Pools. No current adjustments have been made to the accompanying basic financial statements, because the City's investments were primarily in the State of California Local Agency Investment Fund and the fair value adjustment was immaterial. 45 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued P. Implementation of New GASB Pronouncements In 2002, the City adopted new accounting standards in order to conform to the following Governmental Accounting Standards Board Statements: ♦ Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments. • Statement No. 37, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments: Omnibus ♦ Statement No. 38, Certain Financial Statement Note Disclosures GASB Statement No. 34 is a new financial reporting requirement for local governments in the United States. The City has implemented this pronouncement and has restructured much of the information that it has presented in the past. The main goal is to make the .reports more comprehensive and easier to understand and use. GASB Statement No. 37 address selected issues and amends GASB Statement No. 21, Accounting for Escheat Property, and No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments. These Statements make selective changes including accounting for Escheat Property, Management's Discussion and Analysis,Capitalization of Construction-Period Interest, Modified Approach for Reporting Infrastructure, Program Revenues and Major Fund Criteria. GASB Statement No. 38 establishes and modifies disclosure requirements related to Summary of Significant Accounting Policies, actions taken to address violations of significant finance - related legal and contractual provisions, debt and lease obligations, short-term debt, disaggregation of receivable and payable balances, and interfund balances and transfers. 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. A. Cash Deposits The carrying amounts of the City's cash deposits were $3,578,350 at June 30, 2002. Bank balances before reconciling items were $5,160,425 at that date. The total amount of which. was collateralized or insured with securities held by the pledging financial institutions in the City's name is discussed below. 44 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued L. Net Assets In the governmental-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." M. 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. N. 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. O. 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. 43 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued I. 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, rather than currently available financial resources. 1. 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. K t'und Balances In the fund financial statements, governmental funds report reservations of fund balances for amounts that are riot available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balances represent tentative management plans that are subject to change. City Council has designated an amount for operations, which it has defined as being equal to the greater of one-quarter of the total budgeted General Fund appropriations for the current budget year or $2,000,000. The designation is increased annually by an amount equal to the interest the City earned on an equivalent amount of cash and investments. 42 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued G. CapitaI Assets, Continued The following conditions were defined: Condition Ratin Excellent 86-100 Very Good 71-85 Good 56-70 Fair 41-55 Poor 26-40 Very Poor 11-25 Substandard 0-10 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 has completed an internal update for June 30, 2002. 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. H. 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. 41 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued G. Capital Assets Capital assets, which includes land, buildings, improvements, furniture, equ:ipment 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 $1,000, 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 5-10 vears Infrastructure 20-50 years In June 1999, the Governmental Accounting Standards Board (GASB) issued Statement No. 34 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 into its basic financial statements. The City defines infrastructure as the basic physical assets that allow the City to function. The City defines infrastructure as the basic physical assets including 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 Iandscaping areas used by the City in the conduct cf 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 cornmissioned a physical assessment of the streets condition as of June 30, 2001. This condition assessment will be performed every 3 years. 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. 40 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,Continued 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. In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, highly liquid market investments with maturities of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. Market value is used as fair value for those securities for which market quotations are readily available. 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. D. Restricted Cash and Investments Certain restricted cash and investments are held by a fiscal agent for the redemption of bonded debt and for acquisition and construction of capital projects. E. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items. F. Interfund Transactions Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds' (i.e., the noncurrent portion of interfund loans). All other outstanding balances between funds are reported as "due to/from other funds." Advances between funds, are reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. 39 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued 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 (generally 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, intergove=rnmental 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. Fiduciary Fund Financial Statements - Fiduciary fund financial statements include a Statement of Net Assets. The City's fiduciary funds represent agency funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The agency funds are accounted for on a spending or current financial resources measurement focus and the modified accrual basis of accounting as are the governmental funds explained above. 38 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued 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: ♦ Due to/from other funds ♦ Advances to/from other funds ♦ Operating transfers in/out The City applies all applicable GASB pronouncements (including all NCGA Statements and Interpretations currently in effect) as well as the following pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements: Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board (APB) Opinions, and Accounting Research Bulletins (ARB) of the committee on Accounting Procedure. The City applies all applicable FASB Statements and Interpretations issued after November 30, 1989, except those that conflict with or contradict GASB pronouncements. 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. The City has presented all major funds that met the applicable criteria. 37 City of Saratoga Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued A. Financial Reporting Fntity, Continued 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 govenunent- 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. The following entities are reported as blended component units: Saratoga Public Financing Authority - The Saratoga Public Financing Authority (Authority) is a joint powers authority organized by the City of Saratoga (City) and the City of Saratoga Parking Authority (Parking Authority) on June 16, 1993, under the laws of the State of California. The Authority was organized to provide financial assistance to the City and Districts for public improvements for the City and the purchase by the Authority of Local Obligations within the meaning of the Act. Lighting and Landscaping Assessment District #1 - The Lighting and Landscaping Assessment District #1 (District) was established in 1980 for the levy and the collections of assessments upon the several lots or parcels of land in the District, and for the construction or installation of improvements, including maintenance or servicing, or both. Complete financial statements for each component unit may be obtained from the City of Saratoga, 13777 Fruitvale Avenue, Saratoga,CA 95070. B. Basis o f 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 Citti-'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. 36 City of Saratoga Notes to the Basic Financial Statements For the year ended June 30, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The basic financial statements of the City of Saratoga, California, (City) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental agencies. The Governmental Accounting Standards Boards (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the City's accounting policies are described below. A. Financial Reporting Entity The City was incorporated as a municipal corporation in 1956 under the general laws of the State of California, and had a population of 30,444 at June 30, 2002. 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, 2002, the City's staff comprised 62 full time 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. Fire services are provided by special district. Emergency management, code enforcement and inspection services are provided by 2 City employees. ♦ 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 10 employees. ♦ General Government services are provided by a total of 16 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 perfornris 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 35 City of Saratoga Index to Notes to the Basic Financial Statements, Continued For the year ended June 30, 2002 Pale Note 5 - Capital Assets............................................... ...51 Note 6 - Long-Term Debt............................................... 2 Note 7- Non-City Obligations ............................................................ .....54 .......................................... Note 8 - Reserved and Designated Fund Balances............. ......55 Note 9 - Risk Management .......................... ............................................................. ...........................56 Note 10 - Retirement:Plans........................................................ ........57 Note 11 -Joint Powers Agreements......................................... .........58 Note 12 - Commitments and Contingencies .................... „ ..................59 Note 13 - Subsequent Events .............................................................. .59 Note 14- Implementation of GASB Pronouncements and Prior Period Adjustments ...........60 34 City of Saratoga Index to Notes to the Basic Financial Statements For the year ended June 30, 2002 Page Note 1 - Summary of Significant Accounting Policies...................................................................35 A. Financial Reporting Entitv ...............................................................................................35 B. Basis of Accounting/Measurement Focus.....................................................................36 C. Cash, Cash Equivalents and Investments......................................................................39 D. Restricted Cash and Investments....................................................................................39 E. Prepaid Items .....................................................................................................................39 F. Interfund Transactions......................................................................................................39 G. Capital Assets.....................................................................................................................40 H. Claims Payable...................................................................................................................41 I. Compensated Absences....................................................................................................42 J. Long-Term Obligations.....................................................................................................42 K. Fund Balances ..................... ..............................................................................................42 L. Net Assets ...........................................................................................................................43 M. Use of Restricted/Unrestricted Net Assets....................................................................43 N. Property Tax and Special Assessments.......-....................................I............................43 O. Uses of Estimates...............................................................................................................43 P. Implementation of New GASB Pronouncements.........................................................44 Note2-Cash and Investments............................................................................................................44 Note3 Loans Receivable ...................................................................................................................49 Note4 - Interfund Transactions.........................................................................................................49 33 COMPREHENSIVE ANNUAL. FINANCIAL REPORT For the Fiscal Year Ended June 30, 2002 01 S 1956 f " 0 City of Saratoga, California Ra-pruzw 7v kDA4 svcS CITY OF SARATOGA, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2002 Prepared By: ADMINISTRATIVE SERVICES DEPARTMENT City of Saratoga Comprehensive Annual Financial Report For the year ended Jude 30, 2002 Table of Contents Pale Introductory„Section Tableof Contents......................................................................................................................................i Letter of Transmittal....................... ... v .................................................................................................... GFOA Certificate of Achievement for Excellence in Financial Reporting.....................................ix CSMFO Certificate of Award in Outstanding Financial Reporting.................................................x Principal Officials of the City ...............................................................................................................xi Organization Chart...................................................................................................... ....... xii ................. Financial Section Independent Auditors' Report ............................................................................................................1 Management's Discussion and Analysis...........................................................................................3 Basic Financial Statements- Government-Wide Financial Statements ..................................................................................15 Statementof Net Assets............................................................................................................17 Statement of Activities and Changes in Net Assets.................................................... ........18 Fund Financial Statements...........................................................................................................21 Governmental J unds: BalanceSheet...........................................................................................................................24 Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Assets .....................................................27 Statement of Revenues, Expenditures and Changes in Fund Balances..........................28 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Government-Wide Statement of Activities and Changes inNet Assets .................. .......................................... .........................................................30 Fiduciary Funds: Statement of Fiduciary Net Assets.......................................................................................32 City of Saratoga Comprehensive Annual Financial Report For the year ended June 30, 2002 Table of Contents, Continued Page Financial Section Continued Index to Notes to the Basis Financial Statements....................................................................33 Notes to the Basis Financial Statements....................................................................................35 Required Supplementary Information......................................................................................61 BudgetaryInformation.............................................................................................................62 Modified Approach for City Streets Infrastructure Capital Assets ...................................66 DefinedPension Plan................................................................................................................69 Supplementary Information: Non-major Governmental Funds................................................................................................73 CombiningBalance Sheet.........................................................................................................74 Combining Statement of Revenues, Expenditures and Changes in Fund Balances .......76 Capital Assets Used in the Operation of Governmental Funds............................................79 Scheduleby Source ...................................................................................................................81 Schedule by Function and Activity.........................................................................................82 Schedule of Changes by Function and Activity.......................................... ..84 Statistical Section Unaudited Government-Wide Information: Government-Wide Expenses by Function ................................................................. ......86 .............. Government-Wide Revenues............................................................................................. Fund Information: General Fund Expenditures - By Function-Last Ten Fiscal Years ...................... ..88 .................. General Fund Revenues-By Source-Last Ten Fiscal Years.................................... ...............89 Property Tax Levies and Collections-Last Ten Fiscal Years ....................................................90 General Fund Tax Revenue-Last Ten Fiscal Years.......................................................... ...91 Assessed and Estimated Actual Value of Taxable Property - LastTen Fiscal Years............................................................................................................. . ..92 Property Tax Rates (Per $100 of Assessed Valuation) - All Overlapping Governments - LastTen Fiscal Years .............................................................................. ......93 ii City of Saratoga Comprehensive Annual Financial Report For the year ended June 30, 2002 Table of Contents, Continued Pale Statistical Section Unaudited), Continued Fund Information, Continued: Special Assessment Billings and Collections—Last Ten Fiscal Years:......................................94 Ratio of General Obligations Bonded Debt to Assessed Value and Bonded Debt Per Capita—Last Ten Fiscal Years...................................................................95 Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Fund Expenditures --Last Ten Fiscal Years...................................................96 Demographic Statistics—Last Ten Fiscal Years.............................................................................97 Property Values, Remodeling and Construction—Last Ten Fiscal Years................................98 Computationof Legal Debt Margin...............................................................................................99 Computation of Direct and Overlapping Debt ..........................................................................100 PrincipalTaxpayers........................................................................................................................101 Miscellaneous Statistics..................................................................................................................102 ._mil r It��+St^'te:i ,�,�y _�_�'.'��(� �� _ r�.�ti 1��� 7 11 •�r" -J .cii.,',,y. — �•ga:.� e'fi� k.s � I�� by Y' r, �� �;% _ _� - iV 61 i' -Li 1 iLj . ,� �. 1 r gym. ; ._� % 1., �_j October 28 2002 To the Honorable Mayor and City Council City of Saratoga Saratoga,CA 950'(70 The Comprehensive Annual Financial Report (CAFR) of the City of Saratoga for the year ended June 30, 2002, 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. To the best of our knowledge and belief, the enclosed data are accurate in all material respects and are reported in a manner that presents fairly the financial position and results of operations of the various funds, account groups and component units of the City of Saratoga. All disclosures necessary to enable the reader to gain an understanding of the City of Saratoga's activities have been included. The CAFR is presented in the following three sections: 1. Introductory Section - The introductory section, which is unaudited, includes this letter of transmittal,, a list of the City of Saratoga's elected officials and administrative personnel, an organization chart, the Government Finance Officers Association's (GFOA's) of the United States Certificate of Achievement for Excellence in Financial Reporting and the California Society of Municipal Finance Officer's (CSMFO;) Certificate of Award for Financial Reporting to the City of Saratoga for its CAFR for the fiscal _year ending June 30,2001. 2. Financial Section - The basic financial statements include management's discussion and analysis, government-wide financial statements, fund financial statements,notes to the basic financial statements, and required supplementary information as well as the auditors' report on the financial statements and schedules. 3. Statistical Section - Includes selected financial and demographic information, which is generally presented on a multi-year basis and is unaudited. REPORTING ENTITY The financial reporting entity(the City) includes all the fund activity of the primary goverrunent, as well as all of its component units. Component units are legally separated entities for which the City is fully accountable. v 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 District #1 and the agency cash flows and cash balances of the Saratoga Public Finance Authority are reported in the City's financial statements. GOVERNMENTAL STRUCTURE AND RELATED INFORMATION 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 30,444 as reported by the State of California 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. The City supports privatization and has supplemented its work force 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. 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 Finance Commission, Heritage .Preservation Commission, Library Commission, Parks and Recreation Commission, Planning Commission, Public Safety Commission, and Arts and Youth Commission. ECONOMIC CONDITIONS AND OUTLOOK Within a close proximity to many businesses associated with the high technology industry, Saratoga is viewed as a desirable place to live and serves primarily as a residential community to the Silicon Valley. There is limited commercial or industrial activity occurring within the City's boundaries. Due to the community's residential character, the main measure of the City's economic condition is based on the stability of property taxes, motor vehicle license fees, sales tax, franchise fees, as well as the fluctuations in service charges which affects development taxes, permits and fees. Although the local recession provided ample signs of a slowdown, Saratoga's sustained economy V, drove-up assessed valuations of real property by 17.61% from 2001 to 2002. In addition, the City's 2001 passing of the Library General Obligation Bond allowed the City to realize additional tax equity allocation (TEA) revenues as a result of a special legislation signed by California's Governor. SB 1883, which was approved in 2000, restored the eligibility of(four) cities in Santa Clara County to receive TEA funds subsequent to a vote of the people reinstating, increasing or imposing a new tax. In addition, the City's surplus from the "good times" enabled the City to dedicate reserves to long-tern capital projects and to make major service improvements such as the new 5-year capital improvement program (CIP) budget ($13 million), improvements to Congress Springs Park, pavement management program (S1.2 million.), and increased traffic patrols. On the other hand, the tragic events of September 11`h, corporate layoffs and accounting scandals also proved to adversely affect the economy resulting in an 11% decline of sales tax revenues from the previous year and a significant decline of development revenues and other taxes such as transfer, construction, and transient occupancy by as much as 50%. Fortunately the City had other revenues and receipts from one-time projects to assist in the offset of this decline. Saratoga continues to support policies and practices intended to maintain the City's financial integrity. For example, a minimum $2.3 million General Fund operating reserve is maintained and a $200,000 contingency appropriation; as well as a S 1.5 million economic uncertainty reser;e. The budget is built upon a conservative set of assumptions for annual revenues and does not assume that any potential one-time revenue sources will materialize if not yet committed or guaranteed to the City. 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 are compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed benefits likely to be derived, and(2) the valuation of costs and benefits requires estimates and judgments by management. As a recipient of federal, state and local financial assistance, the City is also responsible for guaranteeing that an adequate internal control structure is in place to ensure and document compliance with applicable laws and regulations related to these programs. This internal control structure is subject to periodic evaluation by the City's management. 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 fund level. The City also maintains an encumbrance accounting system as another Vii method of maintaining budgetary control. Encumbered amounts of the operating budget lapse at year-end. However, outstanding encumbrances of a material nature are typically reappropriated as part of the following year's budget. 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. Caporicci & Larson, CPA's, performed the City's fiscal year 2001- 2002 audit. Awards. The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for the CAFR for the fiscal year ended June 30, 2001. In order to be awarded a Certificate of Achievement, the City published an easily readable and efficiently orgaiuzed financial report. This report satisfied both generally accepted accounting principles and applicable legal requirements. The Certificate of Achievement is valid for a period of one year. We believe our current CAFR continues to meet the Certificate of Achievement program's requirements, and plan on submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgements. This CAFR represents the culmination of numerous hours of hard work expended by many individuals in the Accounting Division of the Administrative Services Department. In particular, we would like to express our appreciation to Vivian Gong, Accounting Supervisor and our staff members Jaye Tkach, Julie Ingraham, Karen Caselli, and Joyce Lan. Furthermore, we would like to thank Caporicci & Larson, CPA's for their helpful and timely assistance in the preparation of this report. Finally, we would like to give credit to the City Council and the Finance Advisory Commission for their ongoing interest and support in planning, conducting and advising on the operations of the City in a responsible and progressive manner. Respectfully submitted, Dave Anderson Jesse Baloca City Manager Administrative Services Director viii Certificate of Achievement for Excellence in Financial Reporting Presented to City of Saratoga, California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2001 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. UMifEO sxr,r¢9 MI+}+ D '� N � a�noll r Pr sident a�eace ZDirector LoE�cecutive ix O J Q � v = (oz) , C 4-4 ? o O^ (05 y rt • l .- to.� a ti v �c y '►v o � v � � A w 0 X CITY OF SARATOGA ELECTED OFFICIALS AND ADMINISTRATIVE DERSC)NNEL As of YUNE 30, 2002 CITY COUNCIL Nick Streit—Mayor Evan Baker— Vice Mayor Stan Bogosian John Mehaffey Ann Waltonsmith CITY STAFF Dave Anderson —City Manager Lorie Tinfow—Assistant City Manager Cathleen Boyer—City Clerk Jesse Baloca— Administrative Services Director Tom Sullivan—Community Development Director John Cherbone--Public Works Director Joan Pisani —Recreation Director CITY ATTORNEY Richard S. Taylor— Shute, Mihaly& Weinberger INDEPENDENCE AUDITOR Caporicci & Larson xi w - \ � ] ° B (D / 3^ \ } { § $ �3 2 / Q m ® I— \ / \kk LL ` u `\ p S G ) ) \ Z § � e n § 3 J 2 � k k \ © \ /_ ` - § c cl T )$ © |2 c 2 $ \ « 2E o � 7 J �a RP Ul Fl tm cu k � e § k t- °° L)Z o $ 3 a 2 �� kkk a \/ f § a 2 j M U)r § ) o Q )\ ° 0 { E _ ) _ �F o \/ \ j } 22� § 2 2 k § ui % / ( ° \ = -3 o ■ c Qc c � o E6m j� \� k� ! f § 2 §0 > \ ` — ) \ ° \ o/� § § U o / L= ; ® / E � } � ) } 2@ ! la � ` � /t ) ;w § � \/ t ■ ] . 2 g9 V)p § / �cu S R J- co a =G ® ƒ ) @ ] - � cp ° # ) r \ � � k k �\\ \� §E ca /) ) � d 0 < ; ' � � /� _ x§ i Offices located in: C-�l Bay Area Caporicci&Larson Orange County Certified Public Accountants Sacramento INDEPENDENT AUDITORS' REPORT The 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 the City of Saratoga, California (City), as of and for the year ended June 30, 2002, 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 an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in the United States and the standards applicable to financial audits contained in Government 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 basic financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the City as of June 30, 2002, and the respective changes in financial position for the year then ended in conformity with generally accepted accounting principles in the United States. As discussed in Note 1 to the basic financial statements,the City adopted Statements of the Governmental Accounting Standards Board No. 34, Basic Financial Statements --and Management's Discussion and Analysis -for State and Local Governments; No. 37, Basic Financial Statements and Management's Discussion and Analysis - fe)r State and Local Governments: Omnibus; and, No. 38, Certain Financial Statement Note Disclosures. In accordance with Government Auditing Standards, we have also issued our report dated October 4, 2002 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 grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Toll Free TeL(877)862-2200 Toil Free Tax:(866)436-09'2? Bay Area Orange County Sacramento L 30t1 Clay street,Suite 600 3184-D Airway Avenue '-Campus Commons Rd.,Suite 200 Oakland,California 94612 Costa Mesa,California 92626 Sacramento,California 95825 The Honorable Mayor and Members of the City Council of the City of Saratoga Saratoga,California The accompanying Required Supplementary Information, such as management's discussion and analysis, budgetary comparison information and other information as listed in the table of contents are not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquires 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 accompanying supplementary information is presented for purpose of additional analysis and is not a required part of the basic financial statements. The supplementary information has been subjected to the auditing procedures applied in the audit of the basic financial statements taken as a whole. The introductory section and statistical tables 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. Oakland, California October 4, 2002 2 MANAGEMENT'S DISCUSSION AND ANALYSIS The City of Saratoga provides this Management Discussion and Analysis, a new format prescribed by the provisions of Goveni rent Accounting Standards Board Statement 34 (GASB 34). This narrative overview and analysis of the City of Saratoga's financial activities is for the fiscal year ended June 30, 2002. Please consider this information in conjunction with the accompanying Transmittal Letter and Basic Financial Statements. FINANCIAL HIGHLIGHTS During economic recessed conditions, the City experienced a mix of major revenues that continued to show slight growth and was fortunate to offset the downturn in volatile development and retail related revenue streams. Financial highlights of the year include the following: • 'The City's net assets increased by over S1.2 million or 1.0% over the prior year. The City does not have any business-type assets. • The results of activities produced an increase to nets assets by$1.2 million in fiscal year 2002 and $4.5 million in fiscal year 2001. Although both fiscal years favored an increase to net assets, the net results from activities decreased by$3.2 million or 72.4% from fiscal year 2001 to 2002. • Fiscal year 2002 revenues showed very little change, decreasing slightly by only$4 thousand or .02% from 2001. Change in 2002 revenue activity from 2001 was the result of offsetting activity that reflects the following major highlights: o $2.3 million in one-time capital grants received in 2001 and not in 2002 where $2.1 supports the funding of the City's Gateway capital. improvement project; o The: increase of property taxes of approximately $1.8 million primarily reflects a 17.151% growth in assessed valuations from 2001 to 2002, additional Tax Equity Allocation revenues as a result of a special legislation from passing of 200]. voter approved Library General Obligation Bonds., and property tax proceeds to be used for the new Library General Obligation Bonds debt service payments; and the o Decline of sales tax, local taxes, and interest earnings by more than $0.8 million. • The cost of all City programs increased by S3.2 million or 22.9%, and was largely supported by the increase in revenues that support program expenses. Changes to City program expenses reflect the following major highlights: o $375 thousand increase to general and intergovernmental services; o $500 thousand increase for public safety services that primarily reflects increases to police and animal control services; o $800 thousand increase for public works services such as streets and roads that were offset by pavement: management grant funding; 3 o $779 thousand increase in debt service interest reflects the final payment of the City's 1976 Library General Obligation Bond and payment on the City's new 2001 Library General Obligation Bond, which is supported by the increase in voter approved property tax revenues; o S470 thousand for recreation and other community services where the direct costs are primarily supported by the increase in fees that reflect greater community participation levels; and o $294 thousand recognized as an expense for depreciation. • The General Fund(the primary operating fund) reflected on a current financial resource basis, reports a decrease in fund balance by $5.5 million or 44.2% that primarily reflects the dedication of surplus reserves to the City's new 5-year Capital Improvement Program (CIP). FINANCIAL STATEMENTS This discussion and analysis are intended to serve as an introduction to the City of Saratoga's basic financial statements. The City's basic financial statements include three components: 1) Government-Wide Financial Statements, 2) Fund Financial Statements, and 3)Notes to the Basic Financial Statements. This report also contains additional required supplementary information (budgetary schedules) and other supplementary information (combining financial statement) in addition to the basic financial statements themselves. These components are described below: Basic Financial Statements The Government-Wide Financial Statements present the financial picture of the City from the economic resources measurement focus using the accrual basis of accounting. They typically present governmental activities. These statements include all assets of the City(including infrastructure) as well as all liabilities (including long-term debt). Additionally, certain eliminations have occurred as prescribed by the statement in regards to interfund activity, payables and receivables. The Fund Financial Statements include statements for two categories of activities--- governmental and fiduciary. The governmental activities are prepared using the current financial resources measurement focus and modified accrual basis of accounting. The fiduciary activities are agency funds, which only report a balance sheet and do not have a measurement focus. Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided to explain the differences created by the integrated approach. Government-Wide Financial Statements The Statement of Net Assets and the Statement of Activities and Changes in Net Assets report information about the City as a whole and about its activities. These statements include all assets and liabilities of the City using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. 4 These two statements report the City's net assets and changes in them. Net assets are the difference between assets and liabilities,which is one way to measure the City's financial health, or financial position. Over time, increases or decreases in the City's net assets are one indicator of whether its financial health is improving or deteriorating. Other factors to consider are changes in the City's property tax base and the condition of the City's roads. Governmental activities report most of the City's basis service activities that include general government services, law enforcement,public works and parks, recreation services, and community development services. Property and sales tax, franchise fees, user fees and licenses, state and federal grants, and interest income finance these activities. Fund Financial Statements The Fund financial statements provide detailed information about the major funds---not the City as a whole. Some funds are required to be established by State law and by bond covenants. However, management establishes many other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money. Governmental Funds consist of most of the City's basic services, which focuses on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the City's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the City's programs. The differences of results in the Govenunental fund financial statements to those in the Government-wide financial statements are explained in a reconciliation schedule followin4; each Governmental Fund financial statement. Fiduciary Funds involves the City's role as a trustee or fiduciary for certain funds held on behalf of other organizations or districts. These funds are used to account for assets held by the City and are purely custodial in nature, where assets equal liabilities therefore, related results of operations are not measured or reported. These activities are excluded from the City's other financial statements because the City cannot use these assets to finance its own operations. In addition, the City is responsible for ensuring that the assets reported in these funds are used for their intended purpose. Notes to the Basic Financial Statements provide additional information that is essential to a full understanding of the data provided in the government-wide and the fund financial statements. The notes can be found immediately following the fund financial statements. Required Supplem.entary Information follows the basic financial statements and includes a budgetary comparison schedule that includes a reconciliation between the statutory fund balance for budgetary purposes and the fund balance for the General Fund as presented in the governmental fund financial statements. 5 GOVERNMENT-WIDE FINANCIAL ANALYSIS As mentioned earlier, the City of Saratoga has prepared the fiscal year ended June 30, 2002 financials in a new format prescribed by the provisions of Government Accounting Standards Board Statement 34 (GASB 34). Therefore, for this government-wide financial analysis and for comparative purposes, the City is presenting the fiscal year 2001 in a similar format. Statement of Net Assets The City's Net Assets comparing 2002 to 2001 is as follows: Statement of Net Assets (in Thousands) Governmental Activities 2002 2001 Current Assets $ 29,659 $ 34,281 Capital Assets 106,105 99,666 Total Assets 135,764 133,947 Current Liabilities 2,098 1,645 Long-term Debt 15,085 15,090 Total Liabilities 17,183 16,735 Net Assets: Invested in Capital Assets, net of debt 91,105 84,566 Restricted 18,435 18,394 Unrestricted 9,041 14,387 Total Net Assets $ 118,581 $ 117,347 The City's net assets total $118.6 million at the end of 2002, compared to $117.3 million in 2001. The largest portion of the City's net assets $91.1 million.or 76.8% reflects its investments in capital assets such as land, buildings, equipment and infrastructure (roads,bridges, and other immovable assets), less any related debt used to acquire those assets that is still outstanding. The assets are used to provide services to residents; consequentially, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The portion of the City's restricted net assets, $18.4 million or 15.5%,represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets, $9 million, may be used to meet the City's ongoing obligations to residents and creditors. Internally imposed designations of resources are not presented as restricted net assets. 6 Statement of Changes in Net Assets The City's Change in Net Assets for fiscal years ended June 30, 2002 and 2001 is as follows: Changes in Net Assets (in Thousands) Governmental Activities 2002 2001 Program Revenues: Charges for services $ 5,972 $ 5,576 Operating grants and contributions 1,902 1,773 Capital grants and contributions - 2,300 Total Program Revenues 7,874 9,649 General Revenues: Property taxes 4,044 2,171 Sales taxes 1,067 1,349 Franch'se taxes 1,011 877 Local taxes 1,177 1,478 Motor vehicle in-lieu fees 1,808 1,756 Investment earnings 879 1,132 Miscellaneous 754 206 Total General Revenues 10,740 8,969 Total Revenues 18,614 18,618 Expenses: General and intergovernmental services 2,005 1,630 Public safety 3,653 3,157 Environmental services 650 724 Public works 4,477 3,678 Community services 2,121 1,651 Community development services 2,026 1,923 Interest on long-term debt 920 141 Depreciation expenses 1,529 1,235 Total expenses 17,381 14,139 Increase (decrease) in net assets $ 1,233 $ 4,479 As mentioned earlier, the City's net assets increased by S 12 million or 0.9% over the prior year. Most of the City's general service programs are supported by General Revenues that represent $10.7 million or 57.7% of total citywide revenues. The increase of property taxes of approximately$1.8 million primarily reflects a 17.61% growth in assessed valuations from 2001 to 2002, additional Tax Equity Allocation revenues as a result of a special legislation from passing of 2001 voter approved Library General Obligation Bonds, and property tax proceeds to be used for the new Library General Obligation Bonds debt service payments. 7 Charges for service revenues represent 32.1% of total revenues and is used to support programs related to intergovernmental indirect services, public safety, environmental services, public works, recreation and community services, and community development services. The total cost of all City programs totals $17.4 million and is an increase of$3.2 million or 22.9%. The increase in debt service interest reflects the final payment of the City's 1976 Library General Obligation Bond and payment on the City's new 2001 Library General Obligation Bond. The following chart represents the distribution of all City programs expenses: Envir. Interest Public Works 4% 5% Deprec. 25% 9% Gen 12% Public Safety Comm Dev 21% Comm Svc 12% 12% GENERAL FUND BUDGETARY HIGHLIGHTS Changes from the City's original budget to the final budget is detailed in the Required Supplementary Information Section along with a comparison to actual activity for the year ended June 30, 2002. A highlight of significant changes from the City's original budget to the final budget is summarized as follows: Revenues During the City's mid-year review process, revenue projections were revised to reflect: • A conservative 15% decline in retail activity and sales tax revenues; • Reduction in transfer tax by 30% and transient occupancy tax by 44%to and an increase in construction tax by 49% to reflect a specific housing development project; • An increase in youth sports donations to support park projects and improvements. Expenses and Transfers During the City's fiscal year, amendments to the original budget were revised to primarily reflect: • $5.3 million operating transfers undesignated reserves to the City's new 5-year Capital Improvement Program for projects relating to public safety, infrastructure, facilities, and parks and trails; • Re-appropriation of encumbrances outstanding from the year ended June 30, 2001 to July 1, 2002 for approximately $375k; 8 • Amendment to the Law Enforcement contract for an additional six months of traffic patrol officer support; • $25k for a consultant to assist with projects related to financial.reporting and record keeping; and • $125k for park upgrades, community center remodeling, and a civic center master plan. CAPITAL ASSETS As of June 30, 2002, the City had $106.1 million invested in a variety of capital assets, as reflected in the following schedule, which represents an increase of$6.4 million or 6_5°%o above the prior year. Capital Assets at Year-end (Net of Depreciation - In Thousands) Governmental Activities 2002 2001 Land $ 4,831 $ 4,831 Buildings and Structures 3,088 3,209 Machinery and Equipment 791 665 Infrastructure 88,407 89,558 Construction in Progress 8,988 1,403 Total $ 106,105 $ 99,666 The following reconciliation summarizes the change in Capital Assets, which primarily reflects the addition of Construction in Progress for the new Library Expansion Project and the beginning phases for various Public Works Capital Improvement Projects (CIP's) as part of the City's new multiple-year 5-year CIP budget program and the inclusion of depreciation. Changes in Capital Assets (In Thousands) Governmental Activities 2002 2001 Beginning Balance $ 99,666 $ 10,384 Additions: CIP 7,585 - Infrastructure 9 98,820 Machinerery and Equipment 379 - Retirements: I nve�ntory Adjustments (1,073) (913) Depreciation (461) (8,625) Ending Balance $ 106,105 $ 99,666 9 CASH MANAGEMENT To 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. DEBT ADMINISTRATION Oustanding Debt, at year-end (In Thousands) Governmental Activities 2002 2601 1976 General Obligation Bond $ - $ 100 2001 General Obligation Bond 15,000 15,000 Claims Payable 50 50 Compensated Absences 316 132 Total $ 15,366 $ 15,282 The current portions of long-term debt ($281 thousand and. $19 thousand for 2002 and 2001, respectively) are classified as current liabilities in the City's Statement of Net Assets. During the year, the City made final payment of$100,000 towards a 1976 general obligation bond, which was payable from lease revenues received from the County of Santa Clara for the Saratoga Library. In March 2000,residents of Saratoga approved an increase in their property tax rate to pay for the debt service payments on new Library General Obligation Bonds in the amount of$15 million for a new Library Expansion Project. The Library bonds were issued in May 2001, and the first debt service payment(interest only) began February 2002. The change in compensated absences primarily reflects the way that annual leave is recognized to a more conservative approach. Further information on the City's outstanding debt can be found in the notes to the financial statements. ECONOMIC OUTLOOK AND MAJOR INITIATIVES During the difficult economic times for the Bay Area/Silicon Valley region of Northern California, the City's finances remain stable in its ability to maintain existing operations with current revenues. As of the end of the year, signs of recovery are anticipated but growth remains questionable. The City's primary focus for the new fiscal year is on its need to exercise caution and on maintaining operational balance. 10 Property tax revenues continue to increase along with assessed valuations that have increased by 3.47% for Saratoga and 5.52% for all of Santa Clara County but not to the extent of prior dot.com boom years. The 2000-2001 fiscal year began with an assessed valuation growth of 17.61% for Saratoga and 15.56% for Santa Clara County. Although low interest rates may spur homeowners to refinancing, temporarily boosting retail sales,we anticipat,;that the Bay Area unemployment rate, which continues to be higher than the national average, may counter any return of the 11%decline in sales tax revenues experience this last fiscal year. Even though Cities have been fortunately spared to-date from the loss of State funding from motor-vehicle license fee revenues, the potential threat of a future loss remains unknown till after January 1, 2003. Major initiatives for the fiscal year 2002-2003 is as follows: • Maintain preparedness for future economic and City,operational threats by closely continuing to monitor current revenues and expenditures and by maintaining General Fund Reserves in the amount of$1.5 million for economic uncertainty and $2.3 million for operations; • Preserve the commitment of capital improvement reserves for projects related to public safety, infrastructure, parks and trails, and facilities; and • Utilize existing reserves to acquire a new North Campus property for the expansion of City services. 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. 11 i•, �`Z 1 C�•�1 (� ;4 { � I q: `�fr :Y�1 .,N,"; �'. �1� 4 � _ r 4� L:' r3W �•� City of Saratoga Statement of Net Assets June 30, 2002 Primary _Government Governmental _ Activities ASSETS Current assets: Cash and investments $ 18,646,024 Restricted cash and investments 9,656,985 Receivables: Accounts 602,547 Interest 162,646 Loans 455,561 Deposits 135,000 Total current assets �._._ 29,658,763 Noncurrent assets: Capital assets: Non-depreciable 59,001,944 Depreciable,net _ 47,103,472 Total capital assets _ 106,105,416 Total noncurrent assets _ 106,105,416 Total assets 135,764,1.79 LIABILITIES Current liabilities: Accounts payable 870,888 Accrued payroll 105,361 Interest payable 327,190 Deposits payable 8,107 Deferred revenue 455,561 Claims payable 50,000 Long-term debt-due within one year _ 281,184 Total current liabilities 2,098,291 Noncurrent liabilities: Long-term debt-due in more than one year _ 15,084,793 Total noncurrent liabilities _ 15,084,7g3 Total liabilities 17,183,084 NET ASSETS Investment in capital assets,net of related debt _ 91,105,416 Restricted for: Capital projects 17,546,194 Debt service 554,076 Special projects _ 334,448 Total restricted _ 18,434,718 Unrestricted 9,040,961 Total net assets $ 118,581 095 See accompanying Notes to the Basic Financial Statements. 17 City of Saratoga Statement of Activities and Changes in Net Assets For the year ended June 30, 2002 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Totals Primary government: Governmental activities: General and intergovernmental services $ 2,005,244 $ 1,589,985 $ - $ - $ 1,589,985 Public safety 3,653,114 237,718 259,988 - 497,706 Environmental services 650,184 626,192 35,178 - 661,370 Public works 4,476,568 155,661 1,383,228 - 1,538,889 Community services 2,120,523 1,062,673 10,000 - 1,072,673 Community development services 2,025,887 2,300,600 213,254 - 2,513,854 Interest on long-term debt 919,625 - - Depreciation expense 1,529,505 - Total $ 17,380,650 $ 5,972,829 $ 1,901,648 $ - $ 7,874,477 General revenues: Taxes: Property taxes Sales taxes Franchise taxes Local taxes Total taxes Motor vehicle in-lieu fees Investment earnings Miscellaneous Total general revenues Change in net assets Net assets-beginning of year,as restated Net assets-end of year See accompanying Notes to the Basic Financial Statements. 18 Net(Expense) Revenue and Changes in Net Assets Primary Government Governmental Activities $ (415,259) (3,155,408) 11,186 (2,937,679) (1.,047,850) 487,967 (919,625) (1,529,505) (9,506,173) 4,044,295 1,066,607 1,010,609 _ 1,177,436 7,298,947 1,807,802 878,734 754,252 10,739,735 1,233,562 117,347,533 118,581,095 19 `_ -�.�. ; � _ — .,E �;; r ,.,�-' c `,�y � c, �lr, y�. :,� � �� I��RI`i _V � h,Z-i 1'J� �t 1 '�r�•�C.'i1_ i1 fir• .'��M •'L_�•�r.I ���i _ _ � r��,' � _ �i' fi: I t y?, -,y.,� r4 1 I��, GOVERNMENTAL FUND FINANCIAL STATEMENTS 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. Community Development Block Grant Special Revenue Fund This fund accounts for grant funds received from the Federal Government for the, purpose of developing viable urban communities and for the City's rehabilitation loan program. Streets and Roads Special Revenue Fund This fund accounts for revenues and expenditures received from the Federal Government, under I.S,.T.E.A. and State, Street and Highway Code Sections 2105, 2106, 2107, and 2107.5. The allocations must be spent for street maintenance or repairs; a limited amount may be spent for engineering. Development Services Special Revenue Fund This fund accounts for revenues and expenditures associated with development of the City. Library Expansion Capital Project Fund This fund accounts for resources used for the construction of the City's library. Capital Improvement Capital Project Fund This fund accounts for resources used for the major capital acquisition and construction activities. Other Governmental Funds Other Governmental Funds is the aggregate of all the nonrnajor governmental funds. 23 City of Saratoga Balance Sheet Governmental Funds June 30, 2002 Major Funds Community Development Streets Development General Block Grant and Roads Services ASSETS Cash and investments $ 6,730,082 $ 91,437 $ 2,211,737 $ 1,686,291 Restricted cash and investments 8,542 122,403 _ _ Receivables: Accounts 283,777 - 24,575 66,653 Interest 129,668 _ _ Loans - 455,561 _ Deposits 135,000 - Due from other funds 9,142 Advances to other funds 137,111 _ _ Total assets $ 7,433,322 $ 669,401 $ 2,236,312 $ 1,752,944 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 354,647 $ - $ 104,256 $ 17,678 Accrued payroll 58,997 299 10,592 18,639 Due to other funds Deposits payable - Deferred revenue 455,561 Advances from other funds - 137,111 Claims payable 50,000 _ Total liabilities 463,644 592,971 114,848 36,317 Fund Balances: Reserved for! Encumbrances 164,713 1,500 113,783 2,500 Deposits 135,000 _ _ Petty cash 300 AT&T settlement 16,103 Advances to other funds 137,11.1 Debt service Unreserved,designated for Unrealized investment gain 54,040 - Operations 2,316,262 - PERS 104,751 _ MIS 165,000 - _ Unreserved,undesignated 3,876,398 74,930 2,007,681 1,714,127 Total fund balances 6,969,678 76,430 2,121,464 1,716,627 Total liabilities and fund balances $ 7,433,322 $ 669,401 $ 2,236,312 $ 1,752,944 See accompanying Notes to the Basic Financial Statements. 24 Major Funds Other Total Library Capital Governmental Governmental Expansion Improvement Funds Funds $ - $ 5,787,856 $ 2,138,621 $ 18,646,024 9,526,040 - - 9,656,985 1,750 - 225,792 602,547 32,978 - 162,646 455,561 - 135,000 9,142 137,111 $ 9,560,768 $ 5,787,856 $ 2,364,413 $ 29,805,016 $ 263,274 $ 24,644 $ 106,389 $ 870,888 - - 16,834 105,361 9,1.42 9,142 8,107 8,107 455,561, 137,1,11 50,000 263,274 24,644 140,472 1,636,170 587,152 198,949 36,192 1,104,789 - - 135,000 300 16,1.03 - 137,111 554,076 554,076 10,157 - 64,197 2,316,262 104,7.51 - - - 165,000 8,700,185 5,564,263 1,633,673 23,571,257 9,297,494 5,763,212 2,223,941 28,168,846 'S 9,560,768 $ 5,787,856 $ 2,364,413 $ 29,805,016 25 II 110, 3 City of Saratoga Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Assets June 30, 2002 Total Fund Balances-Total governmental funds S 28,168,846 Amounts reported for governmental activities in the statement of net assets were different because: Capital assets used in governmental activities were not current financial resources. Therefore,they were not reported in the Governmental Funds Balance Sheet. The capital assets were adjusted as follows: Non-depreciable capital assets 59,001,944 Depreciable capital ass(ts,net 47,103,472 Total capital assets 106,105,416 Interest payable on long-team debt did not require current financial resources. Therefore,interest payable was not reported a,;a liability in Governmental Funds Balance Sheet. (327,190) 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: Long-term liabilities-due within one year MUM) Long-term liabilities-clue in more than one year (15,094,793) Total long-term liabilities (15,365,977) Net Assets of Governmental Activities $ 118,581,095 See accompanying Notes to the Basic Financial Statements. 27 City of Saratoga Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the year ended June 30, 2002 Major Funds Community Development Streets Development General Block Grant and Roads Services REVENUES: Property taxes $ 2,772,021 $ $ _ $ Special assessments _ _ Other local taxes 2,067,288 _ Intergovernmental-State 1,885,194 1,055,845 Intergovernmental-Federal 16,698 147,263 252,705 Franchise fees 1,010,609 - _ Use of money and property 216,562 65,991 74,678 78,572 Current service charges 956,953 - 155,660 1,806,154 Reimbursement of interfund cost allocations 1,589,985 _ _ Total revenues 10,515,310 213,254 1,538,888 1,884,726 EXPENDITURES: Current: General and intergovernmental services 1,943,301 _ Public safety 3,570,910 _ _ Environmental services - 59,077 Public works 1,378,334 - 2,804,438 Community services 465,241 122,405 - _ Community development services 111,520 - - 1,892,680 Capital outlay 614,171 39,067 365,373 14,070 Debt service: Principal - Interest and fiscal charges - - _ Total expenditures 8,083,477 161,472 3,228,888 1,906,750 REVENUES OVER (UNDER)EXPENDITURES 2,431,833 51,782 (1,690,000) (22,024) OTHER FINANCING SOURCES(USES): Operating transfers in - - 1,689,999 Operating transfers out (7,536,952) - _ Total other financing sources(uses) (7,536,952) 1,689,999 - Net change in fund balances (5,105,119) 51,782 (1) (22,024) FUND BALANCES: Beginning of year 12,074,797 24,648 2,121,465 1,738,651 End of year $ 6,969,678 $ 76,430 $ 2,121,464 $ 1,716,627 See accompanying Notes to the Basic Financial Statements. 28 Major Funds Other Total Library Capital Governmental Governmental Expansion Improvement Funds Funds $ $ 1,234,190 $ 4,006,211 101,162 101,162 - 2,067,288 135,178 3,076,217 - 416,666 - 1,010,609 381,437 337,435 346,460 1,501,135 5,300 - 1,920,872 4,844,939 - - - 1,589,985 386,737 337,435 3,737,862 18,614,212 - - - 1,943,301 80,529 3,651,439 591,107 650,184 237,919 4,420,691 1,490,032 2,077,678 - - - 2,004,200 5,136,716 120,213 1,673,958 7,963,568 - - 100,000 100,000 - 592,435 592,435 5,136,716 120,213 4,765,980 23,403,496 (4,749,979) 217,222 (1,028,118) (4,789,284) 5,545,990 551,953 7,787,942 - (250,990) (7,787,942) 5,545,990 300,963 (4,749,979) 5,763,212 (727,155) (4,789,284) 14,047,473 - 2,951,096 32,958,130 $ 9,297,494 5 5,763,212 $ 2,223,941 $ 28,168,846 29 City of Saratoga 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 For the year ended June 30, 2002 Net Change in Fund Balances-Total governmental funds $ (4,789,284) Amounts reported for governmental activities in the Statement of Activities and Changes in Net Assets were different because: Governmental funds reported 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 was the amount of capital assets recorded in the current period. 7,963,568 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 governmental funds. (1,529,505) Long-term compensated absences 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 were not reported as expenditures in.governmental funds. (184,027) Bond proceeds provided current financial resources to governmental funds,but issuing debt increased long-term liabilities in the Government-Wide Statement of Net Assets. Repayment of bond principal was an expenditure in governmental funds,but the repayment reduced long-term liabilities in the Government-Wide Statement of Net Assets. Long-term debt repayments 100,000 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. (327,190) Change in Net Assets of Governmental Activities $ 1,233,562 See accompanying Notes to the Basic Financial Statements. 30 FIDUCIARY FUND FINANCIAL STATEMENTS AlZency Funds Cable T.V. Trust - This fund accounts for funds of the Saratoga Community Access T.V. Assessment Districts Bonds - This fund accumulates the monies for payment of bonds for Village Parking Districts #? and #3, the Leonard Road Improvement District and the Saratoga Public Financing Authority which are financed by assessments placed on the County tax roll. Deposits - This fund accounts for deposits paid to the City which are subject to refund or held solely in custodial capacity. 31 City of Saratoga Statement of Fiduciary Net Assets Fiduciary Funds June 30, 2002 Agency Funds ASSETS Cash and investments $ 734,964 Restricted cash and investments 325,228 Accounts receivable 42,946 Total assets $ 1,103,138 LIABILITIES Accounts Payable $ 2,010 Due to assessment district bondholders 386,044 Deposits payable 715,084 Total liabilities $ 1,103,138 See accompanying Notes to the Basic Financial Statements. 32