HomeMy WebLinkAboutACFR - Fiscal Year 2005 06 (PDF) �R
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City
of Saratoga
City's Sot}1 anniversary parade
September 2oo6
Comprehensive Annual
Financial Report
For the Fiscal Year Ended
June 30, 2oo6
City of Saratoga
Comprehensive Annual Financial Report
For the year ended June 30, 2006
Table of Contents
Pale
Introductory Section
Tableof Contents.........................................................................................................................................................i
Letterof Transmittal..................................................................................................................................................v
GFOA Certificate of Achievement for Excellence in Financial Reporting.........................................................x
PrincipalOfficials of the City...................................................................................................................................xi
OrganizationChart...................................................................................................................................................xii
Financial Section
IndependentAuditors' Report................................................................................................................................1
Management's Discussion and Analysis (Required Supplementary Information) .....................................3
Basic Financial Statements:
Government-Wide Financial Statements.......................................................................................................17
Statementof Net Assets..............................................................................................................................19
Statement of Activities and Changes in Net Assets................................................................................20
FundFinancial Statements...............................................................................................................................23
Governmental Funds:
BalanceSheet................................................................................................................................................26
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 in Net Assets.........................................................................29
Fiduciary Funds:
Statement of Fiduciary Net Assets............................................................................................................32
Index to Notes to the Basis Financial Statements........................................................................................33
Notes to the Basic Financial Statements.......................................................................................................35
City of Saratoga
Comprehensive Annual Financial Report
For the year ended June 30, 2006
Table of Contents, Continued
Pale
Financial Section, Continued
Required Supplementary Information:
BudgetaryInformation...............................................................................................................................58
Modified Approach for City Streets Infrastructure Capital Assets......................................................60
Supplementary Information:
Non-Major Governmental Funds....................................................................................................................65
CombiningBalance Sheet...........................................................................................................................66
Combining Statement of Revenues,Expenditures and Changes in Fund Balances..........................68
Schedule of Revenues, Expenditures and Changes in Fund Balances-Budget and Actual:
Local Law Enforcement Special Revenue Fund...............................................................................70
Streets and Roads Special Revenue Fund..........................................................................................71
Lighting and Landscaping Assessment District Special Revenue Fund.......................................72
Community Development Block Grant Special Revenue Fund.....................................................73
Library Bond Debt Service Fund........................................................................................................74
Park Development Capital Projects Fund.........................................................................................75
Library Expansion Capital Projects Fund..........................................................................................76
FiduciaryFunds..................................................................................................................................................77
Combining Statement of Fiduciary Net Assets-Agency Funds..........................................................78
Combining Statement of Changes in Assets and Liabilities-Agency Funds....................................79
Capital Assets Used in the Operation of Governmental Funds .................................................................81
Comparative Schedules by Source............................................................................................................82
Schedule by Function and Activity...........................................................................................................83
Schedule of Changes by Function and Activity......................................................................................84
ii
City of Saratoga
Comprehensive Annual Financial Report
For the year ended June 30, 2006
Table of Contents, Continued
Page
Statistical Section (Unaudited)
NetAssets By Component................................................................................................................................86
Changesin Net Assets.......................................................................................................................................87
Governmental Activities Tax Revenues By Source.......................................................................................88
Fund Balances of Governmental Funds..........................................................................................................89
Changes in Fund Balances of Governmental Funds.....................................................................................90
Governmental Activities Tax Revenues By Source.......................................................................................91
Assessed Value and Estimated Actual Value of Taxable Property.............................................................92
Direct and Overlapping Government.............................................................................................................93
Principal Property Taxpayers...........................................................................................................................94
Property Tax Levies and Collections...............................................................................................................95
Ratios of Outstanding Debt by Type...............................................................................................................96
Ratios of General Bonded Debt Outstanding................................................................................................97
Direct and Overlapping Governmental Activities Debt...............................................................................98
LegalDebt Margin Information.......................................................................................................................99
Demographic and Economic Statistics..........................................................................................................100
PrincipalEmployers........................................................................................................................................101
Full-Time Equivalent City Government Employees by Function.............................................................102
Operating Indicators by Function..................................................................................................................103
Capital Asset Statistics by Function..............................................................................................................104
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13777 FRUITVALE AVENUE • SARATOGA, CALIFORNIA 95070 • (408) 868-1200
v,o a�5� COUNCIL MEMBERS:
Aileen Kao
Incorporated October 22,1956
Kathleen King
Chuck Page
Jill Hunter
Ann Waltonsmith
December 6, 2006
Honorable Mayor and City Council:
The Comprehensive Annual Financial Report (CAFR) of the City of Saratoga for the year
ended June 30, 2006 is hereby submitted as mandated by applicable statutes. These
statutes require that the City of Saratoga annually issue a report on its financial position
and activity, and that an independent firm of certified public accountants audit this report.
Responsibilities for both the accuracy of the data and the completeness and fairness of
the presentation, including all disclosures, rests with the City's management. The
information in this report is intended to present the reader with a comprehensive view of
the City's financial position and the results of its operations for the fiscal year ending June
30, 2006, along with additional disclosures and financial information designed to enable
the reader to gain an understanding of the City's financial activities.
This report was prepared as prescribed in Governmental Accounting Standards Board
(GAAP) Statement No. 34, Basic Financial Statements and Management's Discussions
and Analysis-for State and Local Governments (GASB 34).This GASB Statement
requires that management provide a narrative introduction, overview, and analysis to
accompany the basic financial statements in the form of Management's Discussion and
Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should
be read in conjunction with it.
This Comprehensive Annual Financial Report is organized into three sections:
1. Introductory Section - The introductory section, includes the table of contents,
letter of transmittal, a list of the City of Saratoga's elected officials and City
administrative personnel, an organization chart and the Government Finance
Officers Association's (GFOA's) of the United States and Canada Certificate of
Achievement for Excellence in Financial Reporting to the City of Saratoga for its
CAFR for the fiscal year ending June 30, 2006.
2. Financial Section — The financial section includes the independent auditors'
opinion, management's discussion and analysis, the basic financial statements,
notes to the financial statements, combining statements of non-major funds, and
required supplemental information.
Printed on recycled paper.
3. Statistical Section —The statistical section includes both financial and non-financial
data about the City. This information has been updated in accordance with the
new GASB 44.
THE REPORTING ENTITY AND ITS SERVICES
The City, incorporated in 1956, is located 40 miles south of San Francisco in the Santa
Clara Valley. The City currently covers a land area of approximately 12 square miles and
contains a population of 30,835 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 eight 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, Arts Commission and Youth
Commission. The Commission process is expected to be reviewed by the City Council
and improvements are expected to be enacted by the City Council during the coming
fiscal year.
The financial reporting entity (the City) includes all the fund activity of the primary
government, as well as all of its component units. Component units are legally separated
entities for which the City is fully accountable. 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.
ECONOMIC CONDITIONS AND OUTLOOK
For the past four years the City and the nation faced an economy in recession, triggering
significant City budget shortfalls resulting from cost increases that outpace revenue
growth and funding takeaways by the State of California. The financial structure of
Saratoga with its mostly built-out residential neighborhoods and limited commercial
development means that the two largest sources of revenue for cities—property tax and
sales tax—account for a smaller proportion of revenue than in other cities.
During 2005-06 the City of Saratoga's revenue picture was eased somewhat by long
overdue actions at the State level. Proposition 1A affords some protection to City
revenues and it halts State takeaways by specifying how and when the State can take
future funding. The measure also provided for repayment of the VLF Backfill Gap Loan of
$516,000 which was repaid to the City in 2005-06. These additional funds were treated as
one time revenues and appropriated separately from on-going expenditures in the 2005-
06 budget.
In September, 2006 the City received a significant increase in new property tax revenues
on an annual basis due to the passage of Assembly Billl 17. This legislation effective with
the 2006-07 fiscal year increases the amount of property taxes allocated to the City as a
result of the TEA (Tax Equity Allocation formula). Assembly Member Cohn sponsored the
bill which resulted from a joint effort of the City of Saratoga, Santa Clara County and the 3
other affected cities — Cupertino, Monte Sereno and Los Altos Hills. These cities are
referred to as "no/low tax cities" and will have restored a proportionate share of the
property taxes which they lost to special legislation in 1989. This will result in a permanent
increase in general fund property taxes of$785,777.
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.
The City has practiced a passive approach to investments and maintains flexibility by
managing a pooled cash system. Under the pooled cash concept, the City invests the
cash of all funds with maturities planned to coincide with cash needs. Idle cash is
vi
invested in certain eligible securities as constrained by law and further limited by the City's
investment policy. The goals of the City's investment policy are safety, liquidity and yield.
In addition, the City maintains extensive budgetary controls. The objective of these
controls is to ensure compliance with legal provisions embodied in the annual
appropriated budget approved by the City Council. Activities of the general fund, special
revenue funds, capital projects funds and debt service funds are included in the annual
appropriation.
The level of budgetary control (i.e., the level at which expenditures cannot exceed the
appropriated amount) is at the fund level. The City also maintains an encumbrance
accounting system as another method of maintaining budgetary control. Encumbered
amounts lapse at year-end with the exception of the Capital Improvements Projects,
which are multiple-year projects. However, outstanding encumbrances of a material
nature are reviewed by the responsible department and in some cases a
recommendation is made to the City Council to take action by Resolution to re-
appropriate these funds into the following year's budget.
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 2005-2006 audit.
Awards. The City was awarded a certificate for its early implementation of GASB 34.
Additionally, the Government Finance Officers Association (GFOA) of the United States
and Canada awarded a Certificate of Achievement to the City for its Excellence in
Financial Reporting on the CAFR for the fiscal year ended June 30, 2005. In order to be
awarded a Certificate of Achievement, the City published an easily readable and
efficiently organized financial report. This report satisfied both generally accepted
accounting principles and applicable legal requirements.
The Certificate of Achievement is valid for a period of one year. We believe our current
CAFR continues to meet the Certificate of Achievement program's requirements, and
plan on submitting it to the GFOA to determine its eligibility for another certificate.
Acknowledgements. This CAFR represents the culmination of numerous hours of hard
work expended by many individuals in the 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, Julie Ingraham, Karen Caselli and
Rey Foronda. Furthermore, we would like to thank Caporicci & Larson, CPA's for their
give credit to the City Council for their ongoing interest and support in planning,
conducting and advising on the operations of the City in a responsible and progressive
manner.
Respectfully submitted,
Dave Anderson Sandra Sato
City Manager Interim Finance and Administrative
Services Director
,x
Certificate, o f.
Achievement
for Excellence
in Financial
R eportiong
Presented:to
City of Saratoga,
California
For its Comprehe=ve Annual
Financial Ropoll
for the.Fiscal Year Ended.
June 30.,'2005
A Certi Ficate of Achievement for Excellence in C
Fjaa: ial.
I
Repoitrig is presented by the G-overnment Firtaiace.Officers
Association of the United:States and Canada.to
government units and pu.bhc employeezetirement:
systems whose.cornprebensive.annual financial
reports(CAFIZs),achieve:the,highest,
.standards in-government accoiaritiiig
and financial reporting,
UHITOD S
President
Executive Director Irpe or
CITY OF SARATOGA
ELECTED OFFICIALS AND
ADMINISTRATIVE PERSONNEL
As of June 30, 2006
CITY COUNCIL
Norman Kline - Mayor
Aileen Kao -Vice Mayor
Nick Streit
Ann Waltonsmith
Kathleen King
CITY STAFF
Dave Anderson- City Manager
Barbara Powell - Assistant City Manager
Cathleen Boyer- City Clerk
Michele Braucht- Administrative Services Director
John Livingstone - Community Development Director
John Cherbone - Public Works Director
Joan Pisani- Recreation Director
CITY ATTORNEY
Richard S. Taylor -Shute, Mihaly & Weinberger
INDEPENDENT AUDITOR
Caporicci &Larson, CPAs
*Council reorganization was completed on December 6, 2006
xi
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Caporicci&Larson
Certified Public Accountants
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
30,2006,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. 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 opinion.
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, 2006, and the respective changes in financial position for the year then ended in
conformity with generally accepted accounting principles in the United States.
As described in Note 1 to the basic financial statements, the City adopted the Governmental Accounting
Standards Board Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and
Insurance Recoveries, No. 44, Economic Condition Reporting: The Statistical Section (an amendment of NCGA
Statement 1),No.46,Net Assets Restricted by Enabling Legislation,and No.47,Accounting for Termination Benefits.
'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 is 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 inquiries of
management regarding the methods of measurement and presentation of the Required Supplementary
Information. However,we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming an opinion 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
and,in our opinion,are fairly stated in all material respects in relation to the basic financial statements taken as a
whole. The Introductory and Statistical sections have not been subjected to the auditing procedures applied in
the audit of the basic financial statements and,accordingly,we express no opinion on them.
Irvine,California
October 13,2006
Toll Free Ph:(877)862-2200 Toll Free Fax:(866)436-0927
Oakland Orange County Sacramento San Diego
180 Grand Ave.,Suite 1365 9 Corporate Park,Suite 100 777 Campus Commons Rd.,Suite 200 4858 Mercury,Suite 106
Oakland,California 94612 Irvine,California 92606 Sacramento,California 95825 San Diego,California 92111
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2
City of Saratoga
Management's Discussion and Analysis
June 30, 2006
Introduction
The following provides a narrative overview and analysis of the fiscal operations during the fiscal year
ended June 30, 2006 for the City of Saratoga. The Management Discussion and Analysis is to be read in
conjunction with the annual Transmittal Letter and the Basic Financial Statements.
Fiscal Year 2005-2006 Financial Highlights
• The City's total net assets were$122,425,495 (reference pg#19).
• Total City revenues, including program and general revenues were $19,389,877 (reference pg #20 &
21),while total expenses were$16,026,590 (reference pg#20&21).
• Governmental program revenues were $7,464,152 (reference pg #20), while Governmental program
expenses were$16,026,590 (reference pg#20 &21).
• General Fund revenues were $15,349,927 (reference pg#28), while General Fund expenditures were
$12,058,792(reference pg#28).
The Basic Financial Statements
The Basic Financial Statements are comprised of City-wide Financial Statements and Fund Financial
Statements. These two sets of financial statements provide the reader two different viewpoints of the City's
financial activities and financial position.
The Government-Wide Financial Statements provide a longer-term view of the City's activities as a whole,
and comprise the Statement of Net Assets and the Statement of Activities. The Statement of Net Assets
provides information about the financial position of the City as a whole, including all its capital assets and
long-term liabilities on a full accrual basis, similar to that used by corporations. The Statement of Activities
provides information about all the City's revenues and all its expenses, also on a full accrual basis, with the
emphasis on measuring net revenues and/or expenses for each of the City's programs. The Statement of
Activities explains in detail the change in Net Assets for the fiscal year.
All of the City's activities are required to be grouped into government activities and business-type activities.
The entire amount in the Statement of Net Assets and the Statement of Activities are also required to be
separated into governmental activities or business-type activities in order to provide a summary of these two
activities of the City as a whole. In the case of the City of Saratoga, there are no business-type activities as of
June 30,2006.
The Fund Financial Statements report the City's operations in more detail than the government-wide
statements and focus primarily on the short-term activities of the City's general fund and other major funds.
The Fund Financial Statements measure only current revenues and expenditures and fund balances; they
exclude capital assets,long-term debt,and other long-term amounts.
Major funds account for the major financial activities of the City and are presented individually, while the
activities of non-major funds are presented in summary, with subordinate schedules presenting the detail for
each of these other funds. Major funds are explained below.
The Government-Wide Financial Statements
The Statement of Net Assets and the Statement of Activities present information about the following:
3
City of Saratoga
Management's Discussion and Analysis
June 30, 2006
Governmental activities - All of the City's basic services are considered to be governmental activities,
including general government, community development, public safety, transportation, and, culture and
leisure. These services are supported by general City revenues such as taxes, and by specific program
revenues such as developer fees.
Business-type activities - Enterprise activities are reported here; they would include activities such as water,
sewer, and utilities. Unlike governmental services, these services are supported by charges paid by users
based on the amount of services they use. The City of Saratoga does not have any business-type activities at
this time.
Government-wide financial statements are prepared on the accrual basis,which means they measure the flow
of all economic resources of the City as a whole.
Fund Financial Statements
Fund financial statements provide detailed information about each of the City's most significant funds, called
major funds. The concept of major funds,and the determination of which are major funds,was established by
GASB Statement 34 and replaces the concept of combining like funds and presenting them in total. Instead,
each major fund is presented individually, with all non-major funds summarized and presented only in a
single column. Subordinate schedules present the detail of these non-major funds. Major funds present the
major activities of the City for the fiscal year, and may change from year to year as a result of changes in the
pattern of the City's activities.
Governmental fund financial statements are prepared on the modified accrual basis, which means they
measure only current financial resources and uses. Capital assets and other long-lived assets, along with
long-term liabilities are not presented in the governmental fund financial statements. Unlike the government-
wide financial statements, governmental fund financial statements focus on near-term inflows and outflows
of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year.
Such information may be useful in evaluating the City's near-term financing requirements.
Internal Service Funds-the City had no internal service funds as of June 30,2006.
Enterprise Funds-the City had no enterprise funds as of June 30,2006.
Fiduciary Funds - These funds are used to account for assets held by the City in a trustee capacity or as an
agent for individuals, private organizations, other governmental units, and/or other funds. The City
maintains two such funds:
— Community Access Television Trust Fund - acts as a trustee for the CATV Foundation Board for
investment purposes.
— Assessment District Bonds- acts as an agent for bondholders for Village Parking District#3 which had its
final fiscal transaction in FY 2004-05, the Leonard Road Improvement District and the Saratoga Public
Financing Authority.
Notes to the Financial Statements
Notes to the Financial Statements provide additional information that is essential to a full understanding of
the data provided in the government-wide and fund financial statements. The notes can be found
immediately following the fund financial statements
4
City of Saratoga
Management's Discussion and Analysis
June 30, 2006
Required Supplementary Information
Required supplementary information follows the basic financial statements and includes a budgetary
comparison schedule that includes 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.
Combining and Individual Fund Statements and Schedules
Combining and individual fund statements and schedules provide information for non-major governmental
funds,and special revenue funds.
Government-Wide Financial Analysis
Net assets may serve over time as an indicator of the City's financial position. The total City's assets increased
by$3,363,287 or 2.8% to$122,425,495 in FY 2005-06 from$119,062,208 in FY 2004-05.
The most significant portion of the City's net assets $107,100,370 or 87% accounts for its investment in capital
assets, (e.g.,land,buildings, general government infrastructure, equipment,etc.;) less any related debt used to
acquire those assets that are still outstanding. The City uses these capital assets to provide services to the
citizens,consequently,these assets are not available for future spending.
$9,955,339 or 8% of the City's net assets is unrestricted and may be used to meet the City's ongoing obligations
to citizens and creditors.
$5,369,786 or 4% of the City's net assets are subjected to external restrictions on how they may be used. Of
these restricted net assets, $3,585,428 is restricted for capital projects, $865,378 is for repayment of long-term
debt and$918,980 is restricted for housing activities.
Statement of Net Assets
Governmental Activities
2006 2005
Current Assets $ 18,439,042 $ 16,116,321
Non-Current Assets 111,670 -
Capital Assets 121,270,370 120,224,434
Total Assets 139,821,082 136,340,755
Current Liabilities 3,278,189 2,863,253
Long-term Debt 14,117,398 14,415,294
Total Liabilities 17,395,587 17,278,547
Net Assets:
Investment in capital assets,net of related debt 107,100,370 105,784,434
Restricted for Capital Projects 3,585,428 5,321,217
Restricted for Debt Service 865,378 539,890
Restricted for Special Projects 918,980 466,619
Unrestricted 9,955,339 6,950,048
Total Net Assets $ 122,425,495 $ 119,062,208
5
City of Saratoga
Management's Discussion and Analysis
June 30, 2006
Statement of Changes in Net Assets
Governmental Activities
Functions/Programs 2006 2005 Inc/(Dec)
Program Revenues
Charge for Services $ 4,348,173 $ 3,683,098 $ 665,075
Operating Grants&Contributions 1,549,441 968,213 581,228
Capital Grants&Contributions 1,566,538 864,553 701,985
Total Program Revenues 7,464,152 5,515,864 1,948,288
General Revenues
Property Taxes 5,652,244 4,841,022 811,222
Special Assessments 348,803 328,185 20,618
Voter Approved Indebtness Property Taxes 1,020,681 1,174,484 (153,803)
Sales Taxes 988,132 1,011,721 (23,589)
Local Taxes 1,287,363 1,143,089 144,274
Franchise Fees 1,040,424 994,798 45,626
Intergovernmental-Motor Vehicle In-Lieu Fees 717,737 281,625 436,112
Intergovernmental-Other Unrestricted - 138,595 (138,595)
Investment Earnings 708,551 282,823 425,728
Other Revenues 161,790 192,607 (30,817)
Total Revenues 11,925,725 10,388,949 1,536,776
Expenses
General and Intergovernmental Services 3,472,679 4,159,852 (687,173)
Public Safety Services 3,426,766 3,735,516 (308,750)
Environmental Services 464,681 378,539 86,142
Public Works 4,286,737 3,450,245 836,492
Community Services 1,395,064 1,929,480 (534,416)
Community Development Services 2,226,317 2,347,383 (121,066)
Interest on Long Term Debt(unallocated) 754,346 760,839 (6,493)
Total Expenses 16,026,590 16,761,854 (735,264)
Increase(Decrease)in Net Assets 3,363,287 (857,041)
Net Assets,July 1,2005 119,062,208 119,919,249
Net Assets,June 30,2006 $ 122,425,495 $ 119,062,208
6
City of Saratoga
Management's Discussion and Analysis
June 30, 2006
Chart of Increase or (Decrease) in Revenues by Type
Revenues 2005-06 & 2004-05
8,000,000
7,000,000
6,000,000
5,000,000
❑2005
4,000,000
❑2006
3,000,000
2,000,000
1,000,000
Chrg for Grants Property Other Tax Vehicle Interest All Other
secs Tax License
The net change in revenues for governmental activities from general revenues was an increase of$1,536,776.
The net change in program revenues was an increase of$1,948,288 for a total increase in program revenues
of $3,485,064 which is equal to an approximate 22% net increase. A brief analysis by revenue type of
significant events follows:
• Increases in Revenues
o $811,222 Property Taxes: There are two major components to the increase in property tax
revenues. The first is a reclassification of VLF (Vehicle License Fees) fees and triple flip to
property tax revenues by the State and the second is due to growth in assessed property values
in the City due to new homes and remodels.
o A $701,985 increase in capital grants & contributions was due to the sidewalk relinquishment
cooperative agreement in the Village.
o $665,075 in charges for services was mostly due to increased planning and arborist activity and
an increase in both the building fees and the number of building permits.
o $581,228 of the increase in operating grants and contributions was due to the receipt a traffic
congestion relief grant and a VTA (Valley Transportation Authority) grant.
o The $436,112 net variance of In Lieu VLF is due to two factors: the continuing impact of the
reclassification of VLF fees from intergovernmental to property taxes as a consequence of actions
taken by the State and the $516,892 VLF Repayment to reimburse the City for an earlier State
"take-away".
o $425,728 in Use of Money and Property occurred because interest rates went up and rental
income ($96,434)was received from cell phone towers.
• Decreases in Revenues
o $138,977 of the decrease in revenues from voter approved taxes resulted from a decrease in the
tax rate on the library bond in order to draw down accumulated fund balance.
7
City of Saratoga
Management's Discussion and Analysis
June 30, 2006
Chart of Increase or (Decrease) in Expenditures by Function
Expenditure 2005-06 &2004-05
OF
'W"
SO
a-.a
i 4
1
y r &
t
_}, �1
The net change in expenditures for Governmental Activities was a decrease of$735,264. A brief analysis by
expenditure function of significant events follows
• Increases in Expenditures
o The $836,492 increase in public works expenditures is due to the City's increased emphasis on
pavement management. Also during 2005-06 a major portion of the Saratoga-Sunnyvale Road
project was completed.
• Decreases in Expenditures
• Expenditures decreased for general and intergovernmental services by $687,173 due to the City
Council re-prioritizing expenditures in a series of public meetings because of budgetary
considerations.
• A$534,416 decrease in community services is due to the re-prioritization of City services such as
after school teen programs and other non-revenue generating programs as a result of budgetary
considerations as discussed above.
o $ 308,750 public safety services - This expenditure has decreased for two reasons: contract costs
were lower than the previous year because the City received a credit from the Santa Clara
County's Sheriff's Office against the current year's contract and animal control services
($155,000) were placed under General Services during the last fiscal year.
8
City of Saratoga
Management's Discussion and Analysis
June 30, 2006
Change in Fund Balance
Included in the Major Funds are the General Fund, the Capital Improvement Fund and the Other
Governmental Funds, which are a group of seven funds. They are the Local Law Enforcement, Streets and
Roads, Lighting and Landscaping Assessment District, Community Development Block Grant, Library
Bond, Park Development and Library Expansion funds. The net change of the fiscal year transactions is a
net increase in the ending fund balance for the Major Funds of$2,233,499.
Major Funds
Other
Capital Governmental
General Improvement Funds
Fund Balance Beginning of Year,as restated $ 7,358,951 $ 4,230,848 $ 1,925,761
Total Revenues 15,349,927 1,423,768 2,724,645
Total Expenditures 12,058,792 2,787,358 2,418,691
Transfer In 114,080 22,000 362,893
Transfer Out (384,893) (99,080) (15,000)
Fund Balance End of Year $ 10,379,273 $ 2,790,178 $ 2,579,608
Net Change in Fund Balance $ 3,020,322 $ (1,440,670) $ 653,847
General Fund - As shown in the prior table the net change in the General Fund was an increase of
$3,020,322. This occurred because revenues were more than$3 million greater than expenditures.
Revenues are budgeted conservatively based upon the prior year experience while expenditures are
adjusted to be in line with revenues. Between 2004-05 and 2005-06 revenues increased by $2,790,652. Some
of the major reasons for the increases in revenues are as follows:
o $817,667 over the prior year was received as a result of general increases in assessed property values
for secured and unsecured property taxes and a reclassification of property tax revenues due to the
State's treatment of VLF fees and the"triple flip".
o Other local taxes increased by $413,061. The net increase was only $113,061 since approximately
$300,000 of this was later reclassified to business license fees. While there was some decline in sales
taxes ($56,825), other local taxes such as construction ($69,000) increased. The net increase was
$113,061.
o $516,892 was due to the receipt of a one time repayment from the State to reimburse the City for an
earlier State "take-away", the VLF Gap Loan.
o Increased interest rates resulted in an additional $75,948 overall from the use of money and
property.
o A decrease in current services charges of $455,950 represents the net difference between a
reclassification of a grant to other revenues and the increase in service charges, which was mainly
attributable to more than $600,000 in community development fees. This occurred because more
planning and arborist services were provided. In addition, building fees increased as did the
number of building permits.
o The City received$1,702,270 in other revenues which included several grants.
o The $253,197 decrease in franchise fees is due to the reclassification of $300,000 in local taxes
discussed above.
9
City of Saratoga
Management's Discussion and Analysis
June 30, 2006
While revenues increased almost $2.8 million over the previous year, the base level of expenditures was
reduced due to the City Council re-prioritizing expenditures in a series of public meetings because of
budgetary considerations. The $991,131 increase in expenditures over the prior year was largely due to one
time expenditures and the net result was expenditures of only $12,443,685, which created a positive budget
variance of $2,805,919. After adjusting for the transfers discussed above the actual variance is $1,636,619.
Much of this positive budget variance is due to one time money that has since been re-appropriated in 2006-
07.
Capital Improvement Project Fund - As shown in the table above, the net change in the Capital
Improvement Fund was a decrease of $1,440,670. Capital projects in the City of Saratoga do not have a
distinct funding source, therefore as project expenditures are paid the existing fund balances are depleted.
Major projects during FY 2005-06, were the Saratoga-Sunnyvale Road Gateway Project, Blaney Plaza and
the De Anza Trail Project.
Other Governmental Funds- As shown in the table above there was a net increase of$653,847 in this group
of seven funds. The Streets and Roads Fund accounted for the bulk of the increase in fund balance. There
was an overall decrease in expenditures from last year where much more of the existing fund balance of the
Streets and Roads Fund was used to pay for capital projects. In the current year revenues exceeded
expenditures in the Streets and Roads fund by $334,509. Transfers to the Streets and Roads fund from the
General Fund made up another$270,000 of the increase in fund balance.
General Fund Budgetary Highlights
Changes from the City's original budget to the final budget are detailed in the Required Supplementary
Information Section along with a comparison to actual activity for the year ended. Changes to the City's
budget that increase or decrease the bottom line must be approved by a resolution of the City Council.
Modifications to the budget that are a realignment of fiscal activities with no impact to the bottom line may
be proposed by Department Heads and approved by the City Manager.
The following table compares the General Fund budget to actual. With respect to transfers it shows a
significant negative variance. In actuality, there was a small positive variance between budget and actual.
The significant negative variance is a result of restating the budgetary information to comply with generally
accepted accounting principles. For budgetary purposes the "General Fund" is comprised of a number of
sub funds. This includes what is popularly referred to as the "General Fund" (Fund No. 001) which is more
accurately referred to as the "General Purpose Fund". In addition to the aforementioned fund, examples of
other sub funds included are the "Development Services Fund" (Fund No. 250), the Environmental Services
Fund (Fund No. 260) and the Recreation, Teen, Facilities and Theater Funds (Fund Nos. 290, 291, 292 and
293).
During 2005-06, $1,169,300 in transfers between funds included within the general fund were included in
the budget. However, in order to comply with generally accepted accounting principles, the City eliminated
these transfers from the "actual amounts". This resulted in a budget variance for the General Fund
transfers. If this eliminations had not been made the transfers would have been as follows:
Original Final Actual Positive
Budget Budget Amounts (Negative)
Variance
Transfers in $636,600 $1,357,680 $1,283,380 $74,300
Transfers-out $ -0- $1,581,802 $1,554,193 $27,609
10
City of Saratoga
Management's Discussion and Analysis
June 30, 2006
As the following table shows, the final budget revenue estimates were more than estimated due to the
City's policy of budgeting revenues conservatively. In addition expenditures were all less than budgeted,
many of them significantly so with the result that fund balance increased by $3,020,322 as a result of
expenditures not being made.
As shown in the column for actual financial transactions the use of fund balance was not necessary.
Adopted Final Variance
Budget Budget Actual Final to Actual
Source of Funds:
Property taxes $ 5,216,000 $ 5,054,800 $ 5,652,244 $ 597,444
Other local taxes 2,367,000 2,156,400 2,275,495 119,095
Licenses&permits 17,000 17,000 79,098 62,098
Fines&forfeitures 120,100 120,100 259,256 139,156
Intergovernmental-State 318,700 810,300 877,688 67,388
Intergovernmental-Other - 102,500 112,587 10,087
Franchise fees 735,700 946,300 1,040,424 94,124
Use of money&property 280,400 554,400 681,805 127,405
Other revenue 15,000 15,000 1,702,270 1,687,270
Current Service Charges 3,802,100 4,056,855 2,669,060 (1,387,795)
Transfers In 638,600 1,357,680 114,080 (1,243,600)
Total Source of Funds $ 13,510,600 $ 15,191,335 $ 15,464,007 $ 272,672
Use of Funds:
General and intergovt. $ 3,478,800 $ 3,840,355 $ 3,345,474 $ 494,881
Public safety 3,645,600 3,777,600 3,323,045 454,555
Environmental services 446,200 466,200 462,265 3,935
Public works 2,309,000 2,145,447 1,974,672 170,775
Community services 1,171,400 1,222,600 1,061,679 160,921
Community development 1,951,600 1,966,600 1,824,723 141,877
Capital outlay 47,000 249,000 66,934 182,066
Transfers out - 1,581,802 384,893 1,196,909
Total Use of Funds $ 13,049,600 $ 15,249,604 $ 12,443,685 $ 2,805,919
Capital Assets
The City of Saratoga elected to use the "Modified Approach" as defined by GASB Statement No. 34 for
infrastructure reporting in which eligible infrastructure capital assets are not required to be depreciated if
the following requirements are met.
• The City manages the assets using an asset management system which requires that the City (1)
perform an up-to-date inventory; (2) perform condition assessments and summarize the results
using a measurement scale; and (3) estimate the annual amount to preserve the assets at the
established condition assessment level.
• The City documents that the eligible infrastructure capital assets are being preserved approximately
at or above the established and disclosed condition assessment level.
11
City of Saratoga
Management's Discussion and Analysis
June 30, 2006
The City policy is to achieve an average Pavement Condition Index (PCI) rating of 70 for all streets. The
City achieved the 70 rating with 86% of streets rated as Excellent to Good, 13% of streets are rated as
"Poor", and 1% of streets are rated as "Very Poor". The City spent $1,030,682 to maintain and preserve
eligible infrastructure assets. For more detailed information on Capital Assets activity, please refer to Note
F in the section entitled"Notes to the Basic Financial Statements" and"Required Supplementary Section".
As of June 30, 2006, the City had $121,270,370 invested in a variety of capital assets, as reflected in the
following schedule,which represents an increase of$1,045,936 or less than 1% above the prior year.
Capital Assets at Year End
Net of Depreciation
Governmental Activities
2006 2005
Land $ 9,887,095 $ 11,118,030
Builidng&Structures 17,282,484 16,649,809
Machinery&Equipment 213,102 262,466
Infrastructure 85,366,868 86,513,324
Construction in Progress 8,520,821 5,680,805
$ 121,270,370 $ 120,224,434
The following reconciliation summarizes the change in Capital Assets.
Changes in Capital Assets
Governmental Activities
2006 2005
Beginning Balance $ 120,224,434 $ 118,999,460
Addition:
Land - -
Building and Structures - -
Construction in Progress 2,840,015 1,777,491
Infrastructure - -
Machinery&Equipment 66,933 -
Retirements:
Construction in Progress - (321,164)
Inventory Adjustments - 1,528,246
Depreciation (1,861,012) (1,759,599)
Ending Balance $ 121,270,370 $ 120,224,434
12
City of Saratoga
Management's Discussion and Analysis
June 30, 2006
Debt Administration
The net change in outstanding debt for the City of Saratoga is a decrease of$186,690. During the fiscal year,
the City did not enter into any new debt structures.
Outstanding Debt,at year-end
Governmental Activities
2006 2005
2001 General Obligation Bond $ 14,170,000 $ 14,440,000
Claims Payable 92,957 -
Compensated Absences 235,647 245,294
Total $ 14,498,604 $ 14,685,294
The current portions of long-term debt ($280,000 and $270,000 for 2006 and 2005, respectively) are classified
as current liabilities in the City's Statement of Net Assets.
2001 General Obligation Bond - During the fiscal year, the City made debt service payments that include a
principal reduction of$270,000 on the City's$15,000,000 2001 General Obligation Library bonds.
Claims Payable - The City is fully funded through their membership in a pooled liability assurance
network with the Association of Bay Area Governments.
Economic Factors
In September, 2006 the City received a significant increase in new property tax revenues on an annual basis
due to the passage of Assembly Bill 117. This legislation effective with FY 2006-07 increases the amount of
property taxes allocated to the City as a result of the TEA (Tax Equity Allocation formula). Assembly
Member Cohn sponsored the bill which resulted from a joint effort of the City of Saratoga, Santa Clara
County and the 3 other affected cities - Cupertino, Monte Sereno and Los Altos Hills. These cities are
referred to as "no/low tax cities' and will have restored a proportionate share of the property taxes which
they lost to special legislation in 1989. This will result in a permanent increase in general fund property
taxes of$785,777.
The economy of the City and its major initiatives for the coming year are discussed in detail in the
accompanying Transmittal Letter.
Request for Financial Information
This financial report is designed to provide a general overview of the City of Saratoga's finances for all of
Saratoga's residents, taxpayers, customers, investors, and creditors. This financial report seeks to
demonstrate the City's accountability for the money it receives. Questions concerning any of the
information provided in this report or requests for additional information should be addressed to the
Administrative Services Department, 13777 Fruitvale Avenue,Saratoga,California 95070.
13
This page intentionally left blank.
14
BASIC FINANCIAL STATEMENTS
15
16
GOVERNMENT-WIDE FINANCIAL STATEMENTS
17
# G
� Y�,. .
- . ���, �
`�_ ' .
� �
�s
City of Saratoga
Statement of Net Assets
June 30, 2006
Primary
Government
Governmental
Activities
ASSETS
Current assets:
Cash and investments $ 14,952,855
Restricted cash and investments 2,286,451
Receivables:
Accounts 1,005,677
Interest 180,727
Loans 13,332
Total current assets 18,439,042
Noncurrent assets:
Loans receivable 111,670
Capital assets:
Non-depreciable 63,649,381
Depreciable,net 57,620,989
Total capital assets 121,270,370
Total noncurrent assets 121,382,040
Total assets 139,821,082
LIABILITIES
Current liabilities:
Accounts payable 1,276,877
Accrued payroll 208,117
Other payable 268,435
Interest payable 309,898
Deposits payable 604,909
Unearned revenue 228,747
Long-term debt-due within one year 381,206
Total current liabilities 3,278,189
Noncurrent liabilities:
Long-term debt-due in more than one year 14,117,398
Total noncurrent liabilities 14,117,398
Total liabilities 17,395,587
NET ASSETS
Investment in capital assets,net of related debt 107,100,370
Restricted for:
Capital projects 3,585,428
Debt service 865,378
Special projects 918,980
Total restricted 5,369,786
Unrestricted 9,955,339
Total net assets $ 122,425,495
See accompanying Notes to the Basic Financial Statements.
19
City of Saratoga
Statement of Activities and Changes in Net Assets
For the year ended June 30, 2006
Program Revenues
Operating Capital
Charges for Grants and Grants and
Functions/Programs Expenses Services Contributions Contributions Total
Primary government:
Governmental activities:
General and intergovernmental services $ 3,472,679 $ 31,322 $ - $ - $ 31,322
Public safety 3,426,766 122,899 479,815 - 60Z714
Environmental services 464,681 508,574 45,503 - 554,077
Public works 4,286,737 12,003 939,896 1,485,203 2,437,102
Community services 1,395,064 1,008,157 13,000 81,335 1,102,492
Community development services 2,226,317 2,665,218 71,227 - 2,736,445
Interest on long-term debt(unallocated) 754,346 - - - -
Total $ 16,026,590 $ 4,348,173 $ 1,549,441 $ 1,566,538 $ 7,464,152
General revenues:
Taxes:
Property taxes
Special assessments
Voter approved property tax
Sales taxes
Local taxes
Franchise taxes
Motor vehicle in-lieu
Total taxes
Investment earnings
Other revenues
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.
20
Net(Expense)
Revenue and
Changes in
Net Assets
Primary
Government
Governmental
Activities
$ (3,441,357)
(2,824,052)
89,396
(1,849,635)
(292,572)
510,128
(754,346)
(8,562,438)
5,652,244
348,803
1,020,681
988,132
1,287,363
1,040,424
717,737
11,055,384
708,551
161,790
11,925,725
3,363,287
119,062,208
$ 122,425,495
21
# G
22
FUND FINANCIAL STATEMENTS
23
# G
24
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.
Capital Improvement Capital Projects 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 nonmajor governmental funds.
25
City of Saratoga
Balance Sheet
Governmental Funds
June 30, 2006
Major Funds
Other Total
Capital Governmental Governmental
General Improvement Funds Funds
ASSETS
Cash and investments $ 11,829,675 $ 3,123,180 $ - $ 14,952,855
Restricted cash and investments - - 2,286,451 2,286,451
Receivables:
Accounts 622,853 - 382,824 1,005,677
Interest 160,112 3,814 16,801 180,727
Loans - - 125,002 125,002
Total assets $ 12,612,640 $ 3,126,994 $ 2,811,078 $ 18,550,712
LIABILITIES AND
FUND BALANCES
Liabilities:
Accounts payable $ 1,075,273 $ 115,295 $ 86,309 $ 1,276,877
Accrued payroll 190,459 - 17,658 208,117
Deposits payable 604,909 - - 604,909
Other payable 265,934 - 2,501 268,435
Deferred revenue 96,792 221,521 125,002 443,315
Total liabilities 2,233,367 336,816 231,470 2,801,653
Fund Balances:
Reserved for:
Petty Cash 1,300 - - 1,300
Debt service - - 865,378 865,378
Unreserved,designated for:
Operations 2,554,150 - - 2,554,150
Economic uncertainty 1,500,000 - - 1,500,000
Construction in Progress 614,997 - - 614,997
Community Development Services 1,339,563 - - 1,339,563
Environmental Services 909,760 - - 909,760
Equipment Replacement 247,148 - 247,148
Information Technology 403,520 - - 403,520
Facility Improvement 53,546 - - 53,546
Unreserved,undesignated,reported in:
General fund 2,755,289 - - 2,755,289
Special revenue funds - - 918,980 918,980
Capital projects funds - 2,790,178 795,250 3,585,428
Total fund balances 10,379,273 2,790,178 2,579,608 15,749,059
Total liabilities and fund balances $ 12,612,640 $ 3,126,994 $ 2,811,078 $ 18,550,712
See accompanying Notes to the Basic Financial Statements.
26
City of Saratoga
Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Assets
June 30, 2006
Total Fund Balances-Total governmental funds $ 15,749,059
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 63,649,381
Depreciable capital assets,net 57,620,989
Total capital assets 121,270,370
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. (309,898)
Long-term receivables were not current available resources and therefore, were offset by a deferred revenue
amount equal to the net receivable in the governmental funds. 214,568
Long-term liabilities were not due and payable in the current period. Therefore,they were not reported in the
Governmental Funds Balance Sheet. The long-term liabilities were adjusted as follows:
General obligation bonds (14,170,000)
Claims payables (92,957)
Compensated absences (235,647)
Total long-term liabilities (14,498,604)
Net Assets of Governmental Activities $ 122,425,495
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, 2006
Major Funds
Other Total
Capital Governmental Governmental
General Improvement Funds Funds
REVENUES:
Property taxes $ 5,652,244 $ - $ 1,369,484 $ 7,021,728
Other local taxes 2,275,495 - - 2,275,495
Licenses&permits 79,098 - - 79,098
Fines&forfeiture 259,256 - - 259,256
Intergovernmental-State 877,688 741,000 1,041,556 2,660,244
Intergovernmental-Other 112,587 652,878 210,341 975,806
Franchise fees 1,040,424 - - 1,040,424
Use of money and property 681,805 12,770 57,888 752,463
Other revenue 1,702,270 17,120 - 1,719,390
Current service charges 2,669,060 - 45,376 2,714,436
Total revenues 15,349,927 1,423,768 2,724,645 19,498,340
EXPENDITURES:
Current:
General and intergovernmental services 3,345,474 - - 3,345,474
Public safety 3,323,045 - 100,000 3,423,045
Environmental services 462,265 - - 462,265
Public works 1,974,672 - 1,064,185 3,038,857
Community services 1,061,679 - 148,179 1,209,858
Community development services 1,824,723 22,596 - 1,847,319
Capital outlay 66,934 2,764,762 76,356 2,908,052
Debt service:
Principal - - 270,000 270,000
Interest and fiscal charges - - 759,971 759,971
Total expenditures 12,058,792 2,787,358 2,418,691 17,264,841
REVENUES OVER
(UNDER)EXPENDITURES 3,291,135 (1,363,590) 305,954 2,233,499
OTHER FINANCING SOURCES(USES):
Transfers in 114,080 22,000 362,893 498,973
Transfers out (384,893) (99,080) (15,000) (498,973)
Total other financing sources(uses) (270,813) (77,080) 347,893 -
Net change in fund balances 3,020,322 (1,440,670) 653,847 2,233,499
FUND BALANCES:
Beginning of year,as restated 7,358,951 4,230,848 1,925,761 13,515,560
End of year $ 10,379,273 $ 2,790,178 $ 2,579,608 $ 15,749,059
See accompanying Notes to the Basic Financial Statements.
28
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, 2006
Net Change in Fund Balances-Total governmental funds $ 2,233,499
Amounts reported for governmental activities in the Statement of Activities and Changes in Net Assets were
different because:
Governmental Funds report capital outlay as expenditures. However, in the Government-Wide Statement of
Activities and Changes in Net Assets, the cost of those assets was allocated over their estimated useful lives as
depreciation expense. This is the amount of capital assets recorded in the current period. 21906,948
Depreciation expense on capital assets was reported in the Government-Wide Statement of Activities and Changes in
Net Assets, but it did not require the use of current financial resources. Therefore, depreciation expense was not
reported as expenditures in the Governmental Funds. (1,861,012)
Certain revenues were recorded as deferred revenue in the governmental funds because they did not meet the
revenue recognition criteria of availability. However, they were included as revenue in the Governmental-Wide
Statement of Activities and Changes in Net Assets under the full accrual basis. (108,463)
Long-term compensated absences and claims payables were reported in the Government-Wide Statement of
Activities and Changes in Net Assets,but they did not require the use of current financial resources.Therefore,
long-term compensated absences and claims payable were not reported as expenditures in governmental
funds.
Claims Payables (92,957)
Compensated absences 9,647
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 270,000
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. 5,625
Change in Net Assets of Governmental Activities $ 3,363,287
See accompanying Notes to the Basic Financial Statements.
29
30
FIDUCIARY FUND FINANCIAL STATEMENTS
Agency Funds
Agency Funds is the aggregate of all the agency funds.
31
City of Saratoga
Statement of Fiduciary Net Assets
Fiduciary Funds
June 30, 2006
Agency
Funds
ASSETS
Cash and investments $ 61,903
Interest Receivable 689
Total assets $ 62,592
LIABILITIES
Deposits payable $ 62,592
Total liabilities $ 62,592
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, 2006
Page
Note 1 - Summary of Significant Accounting Policies.......................................................................................35
A. Financial Reporting Entity..................................................................................................................35
B. Basis of Accounting/Measurement Focus.......................................................................................36
C. Cash,Cash Equivalents and Investments........................................................................................38
D. Restricted Cash and Investments......................................................................................................39
E. Interfund Transactions........................................................................................................................39
F. Capital Assets.......................................................................................................................................40
G. Interest Payable....................................................................................................................................40
H. Claims Payable.....................................................................................................................................40
I. Compensated Absences......................................................................................................................41
J. Long-Term Obligations.......................................................................................................................41
K. Fund Balances......................................................................................................................................41
L. Net Assets.............................................................................................................................................42
M. Use of Restricted/Unrestricted Net Assets......................................................................................42
N. Property Tax and Special Assessments............................................................................................42
O. Uses of Estimates.................................................................................................................................43
P. Implementation of New GASB Pronouncements...........................................................................43
Note2- Cash and Investments ...............................................................................................................................44
A. Cash Deposits.......................................................................................................................................44
B. Investments ..........................................................................................................................................45
C. External Investment Pool ...................................................................................................................45
D. Risk Disclosures...................................................................................................................................46
Note3-Loans Receivable.......................................................................................................................................46
33
City of Saratoga
Index to Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
Page
Note 4- Fund Financial Statements Interfund Transaction...........................................................................47
Note5 - Capital Assets...........................................................................................................................................48
Note6- Long-Term Debt.......................................................................................................................................49
Note7- Non-City Obligations.............................................................................................................................50
Note8 - Risk Management....................................................................................................................................51
Note9 - Retirement Plans......................................................................................................................................53
Note10-Net Assets................................................................................................................................................54
A. Investment in Capital Assets,Net of Related Debt.......................................................................54
B. Restricted Net Assets ........................................................................................................................54
Note 11 -Joint Powers Agreements.....................................................................................................................54
Note 12-Excess Expenditures over Appropriations........................................................................................54
Note 13- Commitments and Contingencies......................................................................................................55
A. Lawsuits..............................................................................................................................................55
B. Federal and State Grant Programs..................................................................................................55
C. Commitments.....................................................................................................................................55
Note 14- Prior Period Adjustments.....................................................................................................................56
34
City of Saratoga
Notes to the Basic Financial Statements
For the year ended June 30, 2006
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 30,835 at June 30, 2006. 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, 2006, the City's staff comprised 52 full time,
10 part time, 2 contracted employees, and numerous recreation seasonal employees who were
responsible for the following City provided services:
• Public Safety - The City provides round-the-clock police services under a contract with the
County Sheriff's offices. Fire services are provided by special district. Emergency management,
code enforcement and inspection services are provided by 1 City employee.
• Public Works/Maintenance -The City builds and maintains its parks, streets, curbs, gutters and
related public property with a force of 27 employees. Major projects may be contracted out to
reduce costs.
• Community Development - Zoning administration, plan checking and advance planning
services are provided by 13 employees.
• Culture,Recreation and Community Support services are provided by a total of 8 employees.
• General Government services are provided by a total of 15 employees.
As required by GAAP, these basic financial statements present the City and its component units,
entities for which the City is considered to be financially accountable. The City Council acts as the
governing board. In addition,the City staff performs all administrative and accounting functions for these
entities and these entities provide their services entirely to the City. Blended component units, although
legally separate entities are, in substance, part of the City's operations and data from these units are
combined with data of the City. Discretely presented component units, on the other hand, are reported
in a separate column in the government-wide financial statements to emphasize their legal separateness
from the City. Each blended component unit has a June 30 year-end. The City had no discretely
presented component units.
35
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
A. Financial Reporting Entity, Continued
The following entities are reported as blended component units:
Lighting and Landscaping Assessment District - The Lighting and Landscaping Assessment District
(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. The District is reported as a blended component unit of the City because it
has the same Governing Board as the City.
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. The Authority is reported as a blended component unit of the City because it
has the same Governing Board as the City.
Complete financial statements for each component unit may be obtained from the City of Saratoga,
13777 Fruitvale Avenue,Saratoga,California 95070.
B. Basis of Accounting and Measurement Focus
The accounts of the City are organized on the basis of funds, each of which is considered a separate
accounting entity. The operations of each fund are accounted for with a separate set of self-balancing
accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as
appropriate. Governmental resources are allocated to and accounted for in individual funds based
upon the purposes for which they are to be spent and the means by which spending activities are
controlled.
Government-Wide Financial Statements
The City's government-wide financial statements include a Statement of Net Assets and a Statement of
Activities and Changes in Net Assets. These statements present summaries of governmental activities for
the City. Fiduciary activities of the City are not included in these statements.
These statements are presented on an "economic resources" measurement focus and the accrual basis of
accounting. Accordingly, all of the City's assets and liabilities, including capital assets, as well as
infrastructure assets, and long-term liabilities, are included in the accompanying Statement of Net Assets.
The Statement of Activities presents changes in net assets. Under the accrual basis of accounting,revenues
are recognized in the period in which they are earned while expenses are recognized in the period in which
the liability is incurred.
Certain types of transactions are reported as program revenues for the City in three categories:
• Charges for services
• Operating grants and contributions
• Capital grants and contributions
36
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,Continued
B. Basis of Accounting and Measurement Focus, Continued
Government-Wide Financial Statements,Continued
Certain eliminations have been made as prescribed by GASB Statement No. 34 in regards to interfund
activities, payables and receivables. All internal balances in the Statement of Net Assets have been
eliminated. The following interfund activities have been eliminated:
♦ Transfers in/out
Governmental Fund Financial Statements
Governmental fund financial statements include a Balance Sheet and a Statement of Revenues,
Expenditures and Changes in Fund Balances for all major governmental funds and non-major funds
aggregated. An accompanying schedule is presented to reconcile and explain the differences in net assets
as presented in these statements to the net assets presented in the government-wide financial statements.
The City has presented all major funds that met the applicable criteria. The following funds are major
funds:
General Fund
The General Fund is used to account for all of the general resources of the City not specifically
levied or collected for other City funds and the related expenditures. The General Fund accounts for
all financial resources of the City which are not accounted for in another fund.
Capital Improvement Capital Projects Fund
This fund accounts for resources used for the major capital acquisition and construction activities.
All governmental funds are accounted for on a spending or current financial resources measurement focus
and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are
included on the balance sheets. The Statement of Revenues,Expenditures and Changes in Fund Balances
present increases (revenues and other financing sources) and decreases (expenditures and other
financing uses) in net current assets.
Under the modified accrual basis of accounting, revenues are recognized in the accounting period in
which they become both measurable and available to finance expenditures of the current period.
Accordingly, revenues are recorded when received in cash, except that revenues subject to accrual (up
to 7 months 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.
37
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
B. Basis of Accounting and Measurement Focus, Continued
Governmental Fund Financial Statements,Continued
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 do not have a measurement focus,although they do have a basis
of accounting. An accrual basis of accounting is used to record the financial transactions. Agency funds
are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations.
C. Cash, Cash Equivalents and Investments
The City pools its available cash for investment purposes. The City's cash and cash equivalents are
considered to be cash on hand, demand deposits, and short-term investments with original maturity of
three months or less from the date of acquisition. Cash and cash equivalents are combined with
investments and displayed as Cash and Investments.
Deposit and Investment Risk Disclosures - In accordance with GASB Statement No. 40, Deposit and
Investment Disclosures (Amendment of GASB No. 3), certain disclosure requirements, if applicable, for
Deposits and Investment Risks in the following areas:
➢ Interest Rate Risk
➢ Credit Risk
- Overall
- Custodial Credit Risk
- Concentrations of Credit Risk
➢ Foreign Currency Risk
Other disclosures are specified including use of certain methods to present deposits and investments,
highly sensitive investments,credit quality at year-end and other disclosures.
The City participates in an investment pool managed by the State of California titled Local Agency
Investment Fund (LAIF),which has invested a portion of the pool funds in Structured Notes and Asset-
Backed Securities. LAIF's investments are subject to credit risk with the full faith and credit of the State
of California collateralizing these investments. In addition, these Structured Notes and Asset-Backed
Securities are subject to market risk as to change in interest rates.
38
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,Continued
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 and special projects.
E. Interfund Transactions
Quasi-external transactions are accounted for as revenue, expenditures or expenses, as appropriate.
Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it
that are properly applicable to another fund are recorded as expenditures/expenses in the reimbursed
fund. All other interfund transactions, except quasi-external transactions and reimbursements, are
reported as transfers. Nonrecurring or nonroutine permanent transfers of equity are reported as
residual equity transfers. All other interfund transfers are reported as transfers.
F. Capital Assets
Capital assets, which include land, buildings, improvements, furniture, equipment and infrastructure
assets (e.g., roads,bridges, sidewalks, and similar items), were reported in the applicable governmental
activities in the government-wide financial statements. Capital assets were recorded at historical cost or
estimated historical cost if actual cost was not available. Donated assets were valued at their fair market
value on the date of donation. City policy has set the capitalization threshold for reporting capital
assets at $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 years
Infrastructure 15-50 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 infrastructures 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, 2005. This condition
assessment will be performed every 2 years. The next condition assessment is scheduled for March
2007. 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.
39
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
F. Capital Assets, Continued
The following conditions were defined:
Condition Rating
Excellent 80-100
Very Good 70-79
Good 50-69
Poor 25-49
Very Poor 0-24
The City's policy relative to maintaining the street assets is to achieve an average rating of 70 for all
street segments. This acceptable rating allows minor cracking and raveling of the pavement along with
minor roughness that could be noticeable to drivers traveling at the posted speeds. For all other
infrastructure systems, the City elected to use the Basic Approach as defined by GASB Statement No. 34
for infrastructure reporting. 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, 2005. 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.
G. Interest Payable
In the government-wide financial statements, interest payable of long-term debt is recognized as the
liability is incurred for governmental fund types. The City has not allocated the interest on long-term
debt to departments.
In the fund financial statements, governmental fund types do not recognize the interest payable when the
liability is incurred.
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.
40
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
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. Only the amounts which become due at June 30 are
reported in the fund financials statements as a liability.
J. 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. 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
$2,554,149. The designation is increased annually by an amount equal to the interest the City earned on
an equivalent amount of cash and investments.
City Council has designated$1,500,000 for economic uncertainty.
CIP designation is for future Capital Improvement Projects.
Community development services designation is for development services that includes zoning
administration,inspection services, and development regulation programs.
Environmental services is designated for the environmental fees collected from surcharges on garbage
bills and tipping fees at the landfills and associated grants related to integrated waste management and
storm water management.
41
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
K. Fund Balances, Continued
Equipment Replacement is designated for the maintenance and replacement of the City's tools,
equipments, and vehicles.
Information technology is designated for the support,maintenance, replacement and upgrade of
existing computer network.
Facility Improvement is designated for the maintenance and improvement of City's facilities.
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.
42
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
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.
P. Implementation of New GASB Pronouncements
The City adopted new accounting standards in order to conform to the following Governmental
Accounting Standards Board Statements:
• GASB Statement No. 42 Accounting and Financial Reporting for Impairment of Capital Assets and for
Insurance Recoveries establishes accounting and financial reporting standards for impairment of
capital assets. A capital asset is considered impaired when its service utility has declined
significantly and unexpectedly. This Statement also clarifies and establishes accounting
requirements for insurance recoveries.
• GASB Statement No. 44 Economic Condition Reporting: The Statistical Section (an amendment of
NCGA Statement 1) guides the preparation of the statistical section. The statistical section
presents detailed information, typically in ten-year trends, that assists users in utilizing the basic
financial statements, notes to basic financial statements, and required supplementary
information to assess the economic condition of a government.
• GASB Statement No. 46 Net Assets Restricted by Enabling Legislation addresses selected issues and
amends GASB Statement No. 34, Basic Financial Statements and Management's Discussion and
Analysis for State and Local Governments. The Statement enhances the usefulness and
comparability of net asset information and clarifies the meaning of legal enforceability. The
Statement also specified accounting and financial reporting requirements for restricted net
assets.
• GASB Statement No. 47 Accounting for Termination Benefits provides accounting guidance for
state and local governmental employers regarding benefits (such as early-retirement incentives
and severance benefits) provided to employees that are terminated. The Statement requires
recognition of the cost of involuntary termination benefits in the period in which a government
becomes obligated to provide benefits to terminated employees.
43
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
2. CASH AND INVESTMENTS
The City maintains a cash and investment pool, which includes cash balances and authorized investments
of all funds, which the City Treasurer invests to enhance interest earnings. The pooled interest earned is
allocated to the funds based on average month-end cash and investment balances in these funds. The City
has the following cash and investments at June 30:
Government-Wide
Statement of Fiduciary
Net Assets Funds
Governmental Statement of
Activities Net Assets Total
Cash and investments $ 14,952,855 $ 61,903 $ 15,014,758
Restricted cash and investments 2,286,451 - 2,286,451
Total $ 17,239,306 $ 61,903 $ 17,301,209
The City's Cash and Investments at June 30 in more detail:
Cash and Cash equivalents:
Petty Cash $ 1,300
Demand Deposit 261,527
Total cash and cash equivalents 262,827
Investments:
Local Agency Investment Fund 17,037,321
Total cash and investments 17,300,148
Cash and Investments with Fiscal Agents 1,061
Total $ 17,301,209
A. Cash Deposits
The carrying amounts of the City's cash deposits were $261,527 at June 30, 2006. Bank balances before
reconciling items were$782,842 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.
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.
44
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
2. CASH AND INVESTMENTS, Continued
A. Cash Deposits, Continued
The City follows the practice of pooling cash and investments of all funds, except for funds required to be
held by fiscal agents under the provisions of bond indentures. Interest income from cash and investments
with fiscal agents is credited directly to the related fund.
B. Investments
Under the provisions of the City's investment policy,and in accordance with California Government Code,
the following investments are authorized:
♦ Securities of the U.S. Government or its agencies.
• Certificates of Deposit (or Time Deposits) placed with commercial banks and/or savings and
loan companies.
♦ Negotiable Certificates of Deposit.
♦ California Local Agency Investment Fund.
♦ Investment-grade obligations of state,local governments or public authorities.
♦ Money market mutual funds.
♦ Passbook savings account and demand deposits.
The City has complied with the provisions of GASB Statement No. 31,Accounting and Financial Reporting
for Certain Investments and for External Investments Pools. The City's investments are recorded at fair
value.
C. External Investment Pool
The City's investments with Local Agency Investment Fund (LAIF) at June 30, 2006, include a portion of
the pool funds invested in Structured Notes and Asset-Backed Securities. These investments include the
following:
♦ Structured Notes - debt securities (other than asset-backed securities) whose cash flow
characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more
indices and/or that have embedded forwards or options.
♦ Asset-Backed Securities - the bulk of which are mortgage-backed securities, entitle their
purchasers to receive a share of the cash flows from a pool of assets such as principal and
interest repayments from a pool of mortgages (such as CMO's) or credit card receivables.
LAIF is overseen by the Local Agency Investment Advisory Board, which consists of five members, in
accordance with State statute.
As of June 30, 2006, the City had $17,037,321 invested in LAIF which had invested 2.567% of the pool
investment funds in Structured Notes and Asset-Backed Securities. The LAIF fair value factor of
0.998185821 was used to calculate the fair value of the investments in LAIF.
45
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
2. CASH AND INVESTMENTS, Continued
D. Risk Disclosures
Interest Rate Risk - The City's investment policy does not limit investment maturities as a means of
managing its exposure to fair value losses arising from increasing interest rates. At June 30, 2006, the
City had the following:
Investment
Maturities in
Years
Fair Less
Value Than 1 Year
External Pool:
State of California-Local Agency Investment Fund $ 17,037,321 $ 17,037,321
Credit Risk-As of June 30,2006,the City's investments in external investment pools are unrated.
Custodial Credit Risk-For an investment,custodial credit risk is the risk that,in the event of the failure of
the counterparty, the City will not be able to recover the value of its investments or collateral securities
that are in the possession of an outside party. Of the City's investments, $1,061 of securities is held by
the investment's counterparty,the trustee for the bonds,not in the name of the City as of June 30,2006.
3. LOANS RECEIVABLE
The City had the following loans receivable as of June 30,2006:
Classification
Balance Balance Due within Due more then
July 1,2005 Additions Deletions June 30,2006 one year one year
Housing Rehabilitation Loan Program $ 264,494 $ - $ (139,492) $ 125,002 $ 13,332 $ 111,670
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.
46
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
3. LOANS RECEIVABLE, Continued
At June 30, 2006, the City had outstanding SHARP loans of$125,002. During the year ended June 30, 2006,
the City transferred six existing SHARP loans to the Santa Clara County (County). The County has agreed
to accepted transfer and manage the six existing SHARP loans.
In the Governmental Fund Financial Statements, these loans have been offset by deferred revenue as they
are not expected to be repaid immediately.
In the Government-Wide Financial Statements, the amount of deferred revenue was recognized as
revenues.
4. FUND FINANCIAL STATEMENTS INTERFUND TRANSACTIONS
Transfers In/Out
Transfers for the year ended June 30,2006,were as follows:
Transfers In
Other
General Capital Governmental
Transfers Out Fund Improvement Funds Total
General Fund $ - $ 22,000 $ 362,893 $ 384,893
Capital Improvement 99,080 - - 99,080
Other Governmental Funds 15,000 - - 15,000
Total $ 114,080 $ 22,000 $ 362,893 $ 498,973
The above transfers resulted from the normal course of the City's operations.
47
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
5. CAPITAL ASSETS
Capital assets activity for the year ended June 30,2006,consisted of the following:
Primary Government
Balance Balance
July 1,2005 Additions Retirements Reclassification June 30,2006
Governmental Activities:
Capital assets,not being depreciated:
Land and land improvements $ 11,118,030 $ - $ - $ (1,230,935) $ 9,887,095
Construction in progress 5,680,806 2,840,015 - - 8,520,821
Infrastructure:
Street pavement system 45,241,465 - - - 45,241,465
Total capital assets,not being depreciated 62,040,301 2,840,015 - (1,230,935) 63,649,381
Capital assets,being depreciated:
Buildings and structures 19,278,447 - - 1,223,902 20,502,349
Machinery and equipment 1,558,492 66,933 (206,149) 7,033 1,426,309
Infrastructure:
Bridges 1,563,654 - - - 1,563,654
Signs and lights 762,527 - - - 762,527
Drainage system 39,855,914 - - - 39,855,914
Sidewalks 11,494,250 - - - 11,494,250
Total capital assets,being depreciated 74,513,284 66,933 (206,149) 1,230,935 75,605,003
Accumulated depreciation
Buildings and structures (2,621,607) (598,258) - - (3,219,865)
Machinery and equipment (1,303,058) (116,298) 206,149 - (1,213,207)
Infrastructure:
Bridges (825,741) (30,969) - - (856,710)
Signs and lights (571,992) (31,013) - - (603,005)
Drainage system (8,092,686) (797,118) - - (8,889,804)
Sidewalks (2,914,067) (287,356) - - (3,201,423)
Total accumulated depreciation (16,329,151) (1,861,012) 206,149 - (17,984,014)
Total capital assets,being depreciated,net 58,184,133 (1,794,079) - 1,230,935 57,620,989
Governmental activities capital assets,net $ 120,224,434 $ 1,045,936 $ - $ - $ 121,270,370
48
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
5. CAPITAL ASSETS, Continued
Depreciation Expense by Function:
General Government $ 98,775
Public Safety 3,638
Public Works 1,223,637
Community Services 174,292
Community Development 360,670
Total $ 1,861,012
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.
6. LONG-TERM DEBT
A summary of the City's long-term debt transactions for the year ended June 30,2006,is presented below:
Classification
Amounts Amounts
Balance Balance Due Within Due in More
Description July 1,2005 Additions Retirements June 30,2006 One Year than One Year
General Obligation Bonds:
2001 Library Bonds $ 14,440,000 $ - $ (270,000) $ 14,170,000 $ 280,000 $ 13,890,000
Claims payable - 92,957 - 92,957 30,512 62,445
Compensated absences 245,294 450,937 (460,584) 235,647 70,694 164,953
Total $ 14,685,294 $ 543,894 $ (730,584) $ 14,498,604 $ 381,206 $ 14,117,398
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, 2031, 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, 2006, the outstanding balance of the bonds was
$14,170,000.
49
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
6. LONG-TERM DEBT, Continued
General Obligation 2001 Library Bonds - Original Issue $15,000,000, Continued
The annual debt service requirements on these bonds are as follows:
For the Year
Ending June 30, Principal Interest Total
2007 $ 280,000 $ 736,756 $ 1,016,756
2008 295,000 720,906 1,015,906
2009 310,000 702,756 1,012,756
2010 330,000 683,556 1,013,556
2011 350,000 663,156 1,013,156
2012-2016 2,070,000 2,998,380 5,068,380
2017-2021 2,430,000 2,435,196 4,865,196
2022-2026 3,125,000 1,730,533 4,855,533
2027-2031 4,040,000 798,264 4,838,264
2032 940,000 24,675 964,675
Total $ 14,170,000 $ 11,494,178 $ 25,664,178
Claims Payable
At June 30, 2006, the claims payable has been accrued. See Note 8 Risk Management for more information.
The total amount of the claims payable was$92,957 at June 30,2006.
Compensated Absences
The City's liability for vested and unpaid compensated absences (accrued vacation and sick pay) has been
accrued and amounts to $235,647 at June 30, 2006. The compensated absences liability will generally be
liquidated through the General Fund.
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 30,2006
Leonard Road Improvement Assessment District $ 101,686 $ 40,000
The City is the collecting agent for the Leonard Road Improvement District (District), but is not obligated
for the repayment of debt issued by the District. As a result, the District has not been included in the basic
financial statements of the City.
50
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
8. 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, 2006, the City contributed $122,610 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 30,2006,the City contributed$197,298 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 $92,957 reported at June 30, 2006, 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:
Fiscal Year
Year Claims Claims and Claims
Ended Payable Changes in Claims Payable
June 30, July 1 Estimates Payments June 30
2004 $ 297,194 $ (32,044) $ (34,285) $ 230,865
2005 230,865 (224,897) (5,968) -
2006 - 92,957 - 92,957
51
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
8. 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 Plan Corporation for the fiscal
year ended June 30,2005:
Total assets $ 41,866,497
Total liabilities $ 18,790,003
Net assets $ 23,076,494
Total revenues $ 9,534,589
Total expenses $ 15,482,622
Net decrease in net assets $ (5,948,033)
The following represents summary audited financial information of ABAG Comp Shared Risk Pool for the
fiscal year ended June 30,2005:
Total assets $ 2,003,179
Total liabilities $ 1,044,765
Net assets $ 958,414
Total revenues $ 695,187
Total expenses $ 403,224
Net increase in net assets $ 291,963
Audited financial information for each risk pool may be obtained from ABAG at P.O. Box 2089, Oakland,
California 94604-2089.
52
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
9. RETIREMENT PLANS
Pension Plan
Plan Description -The City contributes to the California Public Employees Retirement System (PERS), a cost-
sharing multiple-employer defined benefit 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 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 $253,227 for the year ended June 30,
2006. The City employer is required to contribute for fiscal year 2005-2006 at an actuarially determined rate
of 10.99% of annual covered payroll for miscellaneous employees.
Annual Pension Cost - For fiscal year 2005-2006, the City's annual pension cost was $397,304. The required
contribution was determined as part of the June 30, 2003, actuarial valuation using the entry age normal
actuarial cost method. The actuarial assumptions included (a) 7.75% investment rate of return (net of
administrative expenses), (b) projected annual salary increases ranging from 3.25% to 14.45% for
miscellaneous employees depending on age, service, and type of employment, and (c) 3.25% per year
payroll growth adjustments. Both (a) and (b) included an inflation component of 3.00%. 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 30,2003,was 20 years for miscellaneous employees for prior and current service unfunded liability.
For the actuarial valuation year ended June 30, 2004, PERS established a cost sharing risk pool (Pool) for
cities and other government entities that have less than 100 active members. Actuarial valuation was
performed with all participants within the same Pool. Therefore, standalone information regarding
Schedule of the Funding Progress for the City is no longer available.
THREE-YEAR TREND INFORMATION FOR PERS
Annual Percentage of
Pension Cost APC Net Pension
Fiscal Year (APC) Contributed Obligation
6/30/04 $ - 100% $ -
6/30/05 151,567 100% -
6/30/06 397,304 100% -
53
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
10. NET ASSETS
A. Investment in Capital Assets,Net of Related Debt
As of June 30,2006,the investment in capital assets,net of related debt consisted of the following:
Capital assets,net(Note 5) $ 121,270,370
2001 General Obligation Library Bonds(Note 6) (14,170,000)
Investment in capital assets,net of related debt $ 107,100,370
B. Restricted Net Assets
As of June 30,2006,the restricted net assets consisted of the following:
Restricted for
Capital Debt Special
Projects Service Projects Total
Restricted net assets $ 3,585,428 $ 865,378 $ 918,980 $ 5,369,786
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.
12. EXCESS EXPENDITURES OVER APPROPRIATIONS
Excess of expenditures over appropriations occurred in individual funds during the fiscal year 2005-2006 as
follows:
Excess
Expenditures over
Fund Expenditures Appropriations Appropriations
Street and Roads Special Revenue Fund $ 766,123 $ 658,400 $ 107,723
Library Expansion Capital Projects Fund 76,356 75,000 1,356
54
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
13. COMMITMENTS AND CONTINGENCIES
A. Lawsuits
The City is presently involved in certain matters of litigation that have arisen in the normal course of
conducting City business. City management believes, based upon consultation with the City Attorney,
that these cases,in the aggregate,are not expected to result in a material adverse financial impact on the
City. Additionally, City management believes that the City's insurance programs are sufficient to cover
any potential losses should an unfavorable outcome materialize.
B. Federal and State Grant Programs
The City participates in Federal and State grant programs. These programs are audited by the City's
independent accountants in accordance with the provisions of the Federal Single Audit Act
Amendments of 1996 and applicable State requirements. 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.
C. Commitments
The City had several outstanding contracts or planned construction projects as of June 30,2006. These
projects are evidenced by contractual commitments with contractors and include:
Original Commitment
Project Commitment Remaining
TEA Consultants $ 13,560 $ 5,950
Cost Allocation Study/Fee Analysis 31,800 24,338
McWilliams House Architectural Services 20,000 4,000
City's Emergency Radio System 131,108 131,108
Haymeadow Sub-Drainage Repair Project 312,345 123,045
Trail Segment#3 Repair Project 16,500 16,500
Lighting and Landscaping Districts 44,945 44,945
Document Imaging Software Upgrades 8,688 8,688
GIS Basemap Services 2,890 2,890
Administrative Services Financial Software Upgrades 100,000 100,000
Community Development Permit Software Upgrades 100,000 100,000
Vehicle Purchase for Field Operations 188,884 165,038
Additional TEA Funding through the Passage of AB117 14,875 14,875
Total $ 985,595 $ 741,377
As of June 30, 2006, 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.
55
City of Saratoga
Notes to the Basic Financial Statements, Continued
For the year ended June 30, 2006
14. PRIOR PERIOD ADJUSTMENTS
Government-Wide Financial Statements
The City recorded the following prior period adjustments to correct prior year:
Prior Period Adjustment
Net Assets, Planning Assessment
as Previously Deposit TDA District CDBG Net Assets,
Reported Payable Revenue Revenue Expenditure as Restated
Governmental Activities:
Net assets $ 118,900,964 $ 383,390 $ (249,725) $ 26,515 $ 1,064 $ 119,062,208
Fund Financial Statements
The City recorded the following reclassifications to the City's funds to more accurately reflect certain
transactions in the prior years:
General Fund - The City determined that the prior year balance of the planning deposit payable was
incorrect and need to be adjusted.
Capital Improvement Fund-The City determined that prior year Transportation Development Act (TDA)
revenue received for the Cox Avenue Railroad Crossing project should be reclassified to deferred
revenue.
Lighting and Landscaping Assessment District Fund - The City determined that the fund's revenue was
understated in the prior year.
CommuniW Development Block Grant Fund- The City determined that prior year expenditures should be
restated to correct grant funded expenditures.
Major Fund Non-Major Fund
Capital Lighting and Community
General Improvement Landscaping Development
Fund Fund Assessment District Block Grant Total
Fund Balances,as Previously Reported $ 6,975,561 $ 4,480,573 $ 75,892 $ 126,233 $ 11,658,259
Prior Period Adjustments 383,390 (249,725) 26,515 1,064 161,244
Fund Balances,as Restated $ 7,358,951 $ 4,230,848 $ 102,407 $ 127,297 $ 11,819,503
56
REQUIRED SUPPLEMENTARY INFORMATION
57
City of Saratoga
Required Supplementary Information
For the year ended June 30, 2006
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 does
not adopt an annual budget for the Capital Improvement Capital Projects Fund. The Capital Improvement
Capital Projects Fund is budgeted on the project length basis. The City adopts an annual budget for Park
Development and Library Expansion Capital Projects funds.
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, contracts, and other commitments for the
expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is
employed as an extension of formal budgetary integration in the General, special revenue and capital
projects funds. Unexpended and unencumbered appropriations of these governmental funds automatically
lapse at the end of the fiscal year.
58
City of Saratoga
Required Supplementary Information, Continued
For the year ended June 30, 2006
1. BUDGETARY INFORMATION,Continued
The following are the budget comparison schedules for General Fund and all major special revenue funds.
Budget Comparison Schedule, General Fund
Variance with
Final Budget
Budgeted Amounts Actual Positive
Original Final Amounts (Negative)
Fund Balances-Beginning,as restated $ 6,975,561 $ 7,358,951 $ 7,358,951 $ -
Resources(inflows):
Property taxes 5,216,000 5,054,800 5,652,244 597,444
Other local taxes 2,367,000 2,156,400 2,275,495 119,095
Licenses and permits 17,000 17,000 79,098 62,098
Fines and forfeiture 120,100 120,100 259,256 139,156
Intergovernmental-State 318,700 810,300 877,688 67,388
Intergovernmental-Other - 102,500 112,587 10,087
Franchise fees 735,700 946,300 1,040,424 94,124
Use of money and property 280,400 554,400 681,805 127,405
Other Revenue 15,000 15,000 1,702,270 1,687,270
Current service charges 3,802,100 4,056,855 2,669,060 (1,387,795)
Transfers in 638,600 1,357,680 114,080 (1,243,600)
Amount available for appropriations 20,486,161 22,550,286 22,822,958 272,672
Charges to Appropriations(outflows):
Current-
General and'intergovernmental services 3,478,800 3,840,355 3,345,474 494,881
Public safety 3,645,600 3,777,600 3,323,045 454,555
Environmental services 446,200 466,200 462,265 3,935
Public works 2,309,000 2,145,447 1,974,672 170,775
Community services 1,171,400 1,222,600 1,061,679 160,921
Community development services 1,951,600 1,966,600 1,824,723 141,877
Capital outlay 47,000 249,000 66,934 182,066
Transfers out - 1,581,802 384,893 1,196,909
Total charges to appropriations 13,049,600 15,249,604 12,443,685 2,805,919
Fund Balances-Ending $ 7,436,561 $ 7,300,682 $ 10,379,273 $ 3,078,591
59
City of Saratoga
Required Supplementary Information, Continued
For the year ended June 30, 2006
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.
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, 2005. 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 139
centerline miles of pave surfaces. The City's road system can be grouped by function class and includes
23.2 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.
60
City of Saratoga
Required Supplementary Information, Continued
For the year ended June 30, 2006
2. MODIFIED APPROACH FOR CITY STREETS INFRASTRUCTURE CAPITAL ASSETS, Continued
The following conditions were defined:
Condition Rating
Excellent 80-100
Very Good 70-79
Good 50-69
Poor 25-49
Very Poor 0-24
The City's policy is to achieve an average rating of 70 for all streets,which is a very good rating. This rating
allows minor cracking and raveling of the pavement along with minor roughness that could be noticeable
to drivers traveling at the posted speeds. As of June 30, 2005, the City's street system was rated at a PCI
index of 70 on the average with the detail condition as follows:
Condition 0/1 of Streets
Excellent to Good 86%
Poor 13%
Very Poor 1%
The City expended $1,030,682 on street maintenance for the year ended June 30, 2006. These routine
maintenance expenditures delayed deterioration. The budget required to maintain and improve the current
level of overall condition through the year 2007 is a minimum of $5,400,000. ($1,800,000 projected budget
each year for the years ending June 30,2007,2008,and 2009.)
A schedule of estimated annual amount calculated to maintain and preserve its streets at the current level
compared to actual expenditures for street maintenance for the last five years is presented below:
Funded
Actual Funded by by Gas Total PCI
Fiscal Year Budget Expenditures General Fund Tax Fund Funded Index
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 -
2002-03 2,207,922 1,553,674 974,514 579,160 1,553,674 -
2003-04 1,961,844 1,489,667 907,327 582,340 1,489,667 70
2004-05 1,800,000 2,609,648 1,478,216 1,131,432 2,609,648 70
2005-06 1,156,547 1,030,382 353,652 676,730 1,030,382 70
As of June 30, 2005, approximately 14% 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$9,583,411 for all
streets with an expected annual budget of$650,000.
61
t o
4 h
62
SUPPLEMENTAL INFORMATION
63
# G
64
NON-MAJOR GOVERNMENTAL FUNDS
Special Revenue Funds
Local Law Enforcement -This fund accounts for State Supplemental Law Enforcement entitlement allocated
based on population.
Streets and Roads - 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.
Lighting and Landscaping Assessment District - This fund accounts for revenues and expenditures
associated with development of the City.
Community Development Block Grant - 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.
Debt Service Fund
Library Bond -Santa Clara County lease revenues are accumulated in this fund to pay annual principal and
interest payments on the 2001 library bond.
Capital Projects Funds
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.
Library Expansion -This fund accounts for resources used for the construction of the City's library.
65
City of Saratoga
Combining Balance Sheet
Nonmajor Governmental Funds
June 30, 2006
Special Revenue Debt Service
Lighting and Community
Landscaping Development
Local Law Streets Assessment Block Library
Enforcement and Roads District Grant Bond
ASSETS
Restricted cash and investments $ - $ 340,402 $ 264,687 $ 11,658 $ 854,155
Receivables:
Accounts - 321,877 927 53,581 6,439
Interest - 3,730 2,085 811 4,784
Loans - - - 125,002 -
Total assets $ - $ 666,009 $ 267,699 $ 191,052 $ 865,378
LIABILITIES AND
FUND BALANCES
Liabilities:
Accounts payable $ - $ 41,341 $ 17,378 $ 1,900 $ -
Accrued payroll - 17,658 - - -
Other payable - Z501 - - -
Deferred Revenue - - - 125,002 -
Total liabilities - 61,500 17,378 126,902 -
Fund Balances:
Reserved for:
Debt service - - - - 865,378
Unreserved,undesignated,reported in:
Special revenues funds - 604,509 250,321 64,150 -
Capital projects funds - - - - -
Total fund balances - 604,509 250,321 64,150 865,378
Total liabilities and fund balances $ - $ 666,009 $ 267,699 $ 191,052 $ 865,378
66
Capital Projects
Total
Other
Park Library Governmental
Development Expansion Funds
$ 115,606 $ 699,943 $ 2,286,451
- - 382,824
1,330 4,061 16,801
- - 125,002
$ 116,936 $ 704,004 $ 2,811,078
$ 25,690 $ - $ 86,309
- - 17,658
- 2,501
- - 125,002
25,690 - 231,470
- - 865,378
- - 918,980
91,246 704,004 795,250
91,246 704,004 2,579,608
$ 116,936 $ 704,004 $ 2,811,078
67
City of Saratoga
Combining Statement of Revenues, Expenditures and Changes in Fund Balances
Nonmajor Governmental Funds
For the year ended June 30, 2006
Special Revenue Debt Service
Lighting and Community
Landscaping Development
Local Law Streets Assessment Block Library
Enforcement and Roads District Grant Bond
REVENUES:
Property taxes $ - $ - $ 348,803 $ - $ 1,020,681
Intergovernmental-State 100,000 933,573 1,236 - 6,747
Intergovernmental-Other - 156,760 - 53,581 -
Use of money and property 6,323 3,044 17,646 12,508
Current service charges - 3,976 - - -
Total revenues 100,000 1,100,632 353,083 71,227 1,039,936
EXPENDITURES:
Current:
Public safety 100,000 - - - -
Public works - 766,123 298,062 - -
Community services - - - 119,374 -
Capital outlay - - - - -
Debt service:
Principal - - - - 270,000
Interest and fiscal charges - - - - 759,971
Total expenditures 100,000 766,123 298,062 119,374 1,029,971
REVENUES OVER
(UNDER)EXPENDITURES - 334,509 55,021 (48,147) 9,965
OTHER FINANCING SOURCES(USES):
Transfers in - 270,000 92,893 - -
Transfers out - - - (15,000) -
Total other financing sources(uses) - 270,000 92,893 (15,000) -
Net change in fund balances - 604,509 147,914 (63,147) 9,965
FUND BALANCES:
Beginning of year,as restated - - 102,407 127,297 855,413
End of year $ - $ 604,509 $ 250,321 $ 64,150 $ 865,378
68
Capital Projects
Total
Other
Park Library Governmental
Development Expansion Funds
$ - $ - $ 1,369,484
1,041,556
210,341
4,152 14,215 57,888
41,400 - 45,376
45,552 14,215 2,724,645
- - 100,000
1,064,185
28,805 - 148,179
76,356 76,356
- 270,000
- - 759,971
28,805 76,356 2,418,691
16,747 (62,141) 305,954
- - 362,893
(15,000)
- - 347,893
16,747 (62,141) 653,847
74,499 766,145 1,925,761
$ 91,246 $ 704,004 $ 2,579,608
69
City of Saratoga
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual
Local Law Enforcement Special Revenue Fund
For the year ended June 30, 2006
Variance with
Final Budget
Budgeted Amounts Actual Positive
Original Final Amounts (Negative)
FUND BALANCES-BEGINNING $ - $ - $ - $ -
RESOURCES(INFLOWS):
Intergovernmental-State 100,000 100,000 100,000 -
Amount available for appropriation 100,000 100,000 100,000 -
CHARGES TO APPROPRIATIONS(OUTFLOWS):
Current:
Public safety 100,000 100,000 100,000 -
Total charges to appropriations 100,000 100,000 100,000 -
FUND BALANCES-ENDING $ - $ - $ - $ -
70
City of Saratoga
Schedule of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual
Streets and Roads Special Revenue Fund
For the year ended June 30, 2006
Variance with
Final Budget
Budgeted Amounts Actual Positive
Original Final Amounts (Negative)
FUND BALANCES-BEGINNING $ - $ - $ - $ -
RESOURCES(INFLOWS):
Intergovernmental-State 611,100 611,100 933,573 322,473
Intergovernmental-Other - - 156,760 156,760
Use of money and property - - 6,323 6,323
Current service charges - - 3,976 3,976
Transfer in - 270,000 270,000 -
Amount available for appropriation 611,100 881,100 1,370,632 489,532
CHARGES TO APPROPRIATIONS(OUTFLOWS):
Current:
Public works 607,200 658,400 766,123 (107,723)
Total charges to appropriations 607,200 658,400 766,123 (107,723)
FUND BALANCES-ENDING $ 3,900 $ 222,700 $ 604,509 $ 381,809
71
City of Saratoga
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual
Lighting and Landscaping Assessment District Special Revenue Fund
For the year ended June 30, 2006
Variance with
Final Budget
Budgeted Amounts Actual Positive
Original Final Amounts (Negative)
FUND BALANCES-BEGINNING,as restated $ 44,200 $ 102,407 $ 102,407 $ -
RESOURCES(INFLOWS):
Property taxes 356,500 351,700 348,803 (2,897)
Intergovernmental-State - - 1,236 1,236
Use of money and property 1,700 1,700 3,044 1,344
Transfer in - - 92,893 92,893
Amount available for appropriation 402,400 455,807 548,383 92,576
CHARGES TO APPROPRIATIONS(OUTFLOWS):
Current:
Public works 290,100 290,100 298,062 (7,962)
Transfer out 43,700 43,700 - 43,700
Total charges to appropriations 333,800 333,800 298,062 35,738
FUND BALANCES-ENDING $ 68,600 $ 122,007 $ 250,321 $ 128,314
72
City of Saratoga
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual
Community Development Block Grant Special Revenue Fund
For the year ended June 30, 2006
Variance with
Final Budget
Budgeted Amounts Actual Positive
Original Final Amounts (Negative)
FUND BALANCES-BEGINNING,as restated $ 92,000 $ 127,297 $ 127,297 $ -
RESOURCES(INFLOWS):
Intergovernmental-Other 217,500 427,411 53,581 (373,830)
Use of money and property 2,300 2,300 17,646 15,346
Amount available for appropriation 311,800 557,008 198,524 (358,484)
CHARGES TO APPROPRIATIONS(OUTFLOWS):
Current:
Community Services 202,491 412,402 119,374 293,028
Transfer out 15,000 15,000 15,000 -
Total charges to appropriations 217,491 427,402 134,374 293,028
FUND BALANCES-ENDING $ 94,309 $ 129,606 $ 64,150 $ (65,456)
73
City of Saratoga
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual
Library Bond Debt Service Fund
For the year ended June 30, 2006
Variance with
Final Budget
Budgeted Amounts Actual Positive
Original Final Amounts (Negative)
FUND BALANCES-BEGINNING $ 766,500 $ 855,413 $ 855,413 $ -
RESOURCES(INFLOWS):
Property taxes 912,400 912,400 1,020,681 108,281
Intergovernmental-State - - 6,747 6,747
Use of money and property 8,200 8,200 12,508 4,308
Amount available for appropriation 1,687,100 1,776,013 1,895,349 108,281
CHARGES TO APPROPRIATIONS(OUTFLOWS):
Debt service:
Principal 270,000 270,000 270,000 -
Interest and fiscal charges 762,400 762,400 759,971 Z429
Total charges to appropriations 1,032,400 1,032,400 1,029,971 2,429
FUND BALANCES-ENDING $ 654,700 $ 743,613 $ 865,378 $ 121,765
74
City of Saratoga
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual
Park Development Capital Projects Fund
For the year ended June 30, 2006
Variance with
Final Budget
Budgeted Amounts Actual Positive
Original Final Amounts (Negative)
FUND BALANCES-BEGINNING $ 10,100 $ 74,499 $ 74,499 $ -
RESOURCES(INFLOWS):
Use of money and property - - 4,152 4,152
Current service charges 62,100 124,200 41,400 (82,800)
Amount available for appropriation 72,200 198,699 120,051 4,152
CHARGES TO APPROPRIATIONS(OUTFLOWS):
Community services - 192,200 28,805 163,395
Total charges to appropriations - 192,200 28,805 163,395
FUND BALANCES-ENDING $ 72,200 $ 6,499 $ 91,246 $ 84,747
75
City of Saratoga
Schedule of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual
Library Expansion Capital Projects Fund
For the year ended June 30, 2006
Variance with
Final Budget
Budgeted Amounts Actual Positive
Original Final Amounts (Negative)
FUND BALANCES-BEGINNING $ 859,300 $ 766,145 $ 766,145 $ -
RESOURCES(INFLOWS):
Use of money and property 28,900 28,900 14,215 (14,685)
Amount available for appropriation 888,200 795,045 780,360 (14,685)
CHARGES TO APPROPRIATIONS(OUTFLOWS):
Capital outlay 75,000 75,000 76,356 (1,356)
Total charges to appropriations 75,000 75,000 76,356 (1,356)
FUND BALANCES-ENDING $ 813,200 $ 720,045 $ 704,004 $ (16,041)
76
FIDUCIARY FUND FINANCIAL STATEMENTS
Agency Funds
Cable T.V. Trust -This fund accounts for funds of the Saratoga Community Access T.V.Foundation.
Assessment Districts Bonds - This fund accumulates the monies for payment of bonds for Village Parking
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.
77
City of Saratoga
Combining Statement of Fiduciary Net Assets
Agency Funds
June 30, 2006
Total
Cable T.V. Assessment Agency
Trust District Bonds Funds
ASSETS
Cash and investments $ 60,842 $ 1,061 $ 61,903
Interest Receivable 689 - 689
Total assets $ 61,531 $ 1,061 $ 62,592
LIABILITIES
Deposits payable $ 61,531 $ 1,061 $ 62,592
Total liabilities $ 61,531 $ 1,061 $ 62,592
78
City of Saratoga
Combining Statement of Changes in Assets and Liabilities
Agency Funds
For the year ended June 30, 2006
Balance Balance
July 1,2005 Additions Deductions June 30,2006
Cable T.V.Trust
Assets:
Cash and investments $ 73,540 $ 2,302 $ (15,000) $ 60,842
Interest Receivable 524 689 (524) 689
Total assets $ 74,064 $ 2,991 $ (15,524) $ 61,531
Liabilities:
Deposits payable $ 74,064 $ 2,991 $ (15,524) $ 61,531
Assessment District Bonds
Assets:
Cash and investments $ - $ 1,061 $ - $ 1,061
Restricted cash and investments 192,122 192,195 (384,317) -
Interest Receivable 274 - (274) -
Accounts receivable 42,946 - (42,946) -
Total assets $ 235,342 $ 193,256 $ (427,537) $ 1,061
Liabilities:
Deposits payables $ - $ 1,061 $ - $ 1,061
Due to assessment district bondholders 235,342 193,256 (428,598) -
Total liabilities $ 235,342 $ 194,317 $ (428,598) $ 1,061
Total Agency Funds
Assets:
Cash and investments $ 73,540 $ 3,363 $ (15,000) $ 61,903
Restricted cash and investments 192,122 192,195 (384,317) -
Interest Receivable 798 689 (798) 689
Accounts receivable 42,946 - (42,946) -
Total assets $ 309,406 $ 196,247 $ (443,061) $ 62,592
Liabilities:
Deposits payable $ 74,064 $ 4,052 $ (15,524) $ 62,592
Due to assessment district bondholders 235,342 193,256 (428,598) -
Total liabilities $ 309,406 $ 197,308 $ (444,122) $ 62,592
79
# G
so
CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS
81
City of Saratoga
Capital Assets Used in the Operation of Governmental Funds
Comparative Schedules by Source
June 30, 2006 and 2005
2006 2005
GOVERNMENTAL FUNDS CAPITAL ASSETS:
Land and land improvements $ 9,887,095 $ 11,118,030
Buildings and structures 20,502,349 19,278,447
Machinery and equipment 1,426,309 1,558,492
Infrastructure 98,917,810 98,917,810
Construction in progress 8,520,821 5,680,806
Total governmental funds capital assets 139,254,384 136,553,585
Accumulated depreciation (17,984,014) (16,329,151)
Total governmental funds capital assets,net $ 121,270,370 $ 120,224,434
INVESTMENTS IN GOVERNMENTAL FUNDS
CAPITAL ASSETS BY SOURCE:
General Fund $ 109,636,671 $ 109,760,888
Special revenue funds 1,418,730 1,479,663
Capital projects funds 28,101,635 25,261,619
Donations 97,348 51,415
Accumulated depreciation (17,984,014) (16,329,151)
Total governmental funds capital assets $ 121,270,370 $ 120,224,434
82
City of Saratoga
Capital Assets Used in the Operation of Governmental Funds
Schedule by Function and Activity
June 30,2006
Land and Buildings Machinery Construction
Land and and in
Improvements Structures Equipment Infrastructure Progress Total
FUNCTION AND ACTIVITY
General and intergovernmental services:
Management services $ - $ 271,631 $ 47,837 $ - $ 42,737 $ 362,205
Administrative services - 167,585 44,004 - - 211,589
Intergovernmental services 118,184 3,096,786 67,606 - - 3,282,576
Total general and
intergovernmental services 118,184 3,536,002 159,447 - 42,737 3,856,370
Public safety:
Police services - - 27,813 - - 27,813
Code enforcement - - 22,548 - - 22,548
Total public safety - - 50,361 - - 50,361
Public works:
Streets and sidewalks 134,695 30,628 606,115 98,917,810 5,016,146 104,705,394
Parks/open space 2,529,529 92,622 338,913 - - 2,961,064
Total public works 2,664,224 123,250 945,028 98,917,810 5,016,146 107,666,458
Community services 5,362,223 2,543,198 227,811 - 2,635,068 10,768,300
Community development services 1,742,464 14,299,899 43,662 - 826,870 16,912,895
Total governmental funds capital assets 9,887,095 20,502,349 1,426,309 98,917,810 8,520,821 139,254,384
Accumulated depreciation - (3,219,865) (1,213,207) (13,550,942) - (17,984,014)
Total governmental funds
capital assets,net $ 9,887,095 $ 17,282,484 $ 213,102 $ 85,366,868 $ 8f520f821 $ 121,270,370
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, 2006
Governmental Governmental
Funds Capital Funds Capital
Assets Assets
July 1,2005 Additions Deletions June 30,2006
FUNCTION AND ACTIVITY
General and intergovernmental services:
Management services $ 362,205 $ - $ - $ 362,205
Administrative services 211,589 - - 211,589
Intergovernmental services 3,282,576 - - 3,282,576
Total general and
intergovernmental services 3,856,370 - - 3,856,370
Public safety:
Police services 27,813 - - 27,813
Code enforcement 37,548 - (15,000) 22,548
Total public safety 65,361 - (15,000) 50,361
Public works:
Streets and sidewalks 102,123,681 2,460,631 121,084 104,705,396
Parks/open space 3,061,212 - (100,148) 2,961,064
Total public works 105,184,893 2,460,631 20,936 107,666,460
Community services 10,409,526 359,874 (1,100) 10,768,300
Community development services 17,037,435 87,543 (212,085) 16,912,893
Total governmental funds capital assets 136,553,585 2,908,048 (207,249) 139,254,384
Accumulated depreciation (16,329,151) (1,861,012) 206,149 (17,984,014)
Total governmental funds
capital assets,net $ 120,224,434 $ 1,047,036 $ (1,100) $ 121,270,370
84
STATISTICAL SECTION (Unaudited)
This part of the City of Saratoga's comprehensive annual financial report presents detailed
information as a context for understanding what the information in the financial statements, note
disclosures and required supplementary information says about the government' overall financial
health.
Contents
Financial Trends
These schedules contain trend information to help the reader understand how the
government's financial performance and well being have changed over time.
Revenue Capacity
These schedules contain information to help the reader assess the government's
most significant local revenue source, the property tax.
Debt Capacity
These schedules present information to help the reader assess the affordability of
the government's current levels of outstanding debt and the government's ability
to issue additional debt in the future.
Demographic and Economic Information
These schedules offer demographic and economic indicators to help the reader
understand the environment within which the government's financial activities
take place.
Operating Information
These schedules contain service and infrastructure data to help the reader
understand how the information in the government's financial report relates to
the services the government provides and the activities it performs.
85
City of Saratoga
Net Assets by Component
Last Two Fiscal Years
(accrual basis of accounting)
(amounts expressed in thousands)
Fiscal Year
2005 2006
Primary government
Governmental activities
Invested in capital assets,net of related debt $ 105,784 $ 107,100
Restricted 6,328 5,370
Unrestricted 6,789 9,955
Total primary government $ 118,901 $ 122,425
Source: CAFR
86
City of Saratoga
Changes in Net Assets
Last Two Fiscal Years
(accrual basis of accounting)
(amounts expressed in thousands)
Fiscal Year
2005 2006
Expenses
Govermental Activities:
General government $ 4,160 $ 3,473
Public safety 3,736 3,427
Enviromental 379 465
Public works 3,450 4,287
Community services 1,929 1,395
Community development services 2,349 2,226
Interest on long-term debt(Unallocated) 760 754
Depereciation Expense(Unallocated) - -
Total Governmental Activities Expenses $ 16,763 $ 16,027
Program Revenues
Governmental activities:
Charges for services
General government $ - $ 31
Public safety 141 122
Enviromental 504 509
Public works 8 12
Community services 757 1,008
Community development services 1,890 2,665
Operating grants and contributions 1,218 1,549
Capital grants and contributions 865 11568
Total governmental activities program revenues 5,383 7,464
Total primary government program revenues $ (11,380) $ (8,563)
Net(expense)/revenue:
Governmental activities $ (11,380) $ (8,563)
Total primary government net expense $ (11,380) $ (8,563)
General Revenue and Other Changes in
Net Assets
Governmental activities:
Property taxes $ 4,841 $ 5,652
Special assessments 302 348
Voter approved property taxes 1,174 1,021
Sales taxes 1,011 988
Local taxes 1,143 1,288
Franchise taxes 995 1,040
Motor vehicle in-lieu 420 718
Total taxes 9,886 11,055
Investment earnings 283 709
Other revenues 193 162
Total Governmental activities 10,362 11,926
Total primary government 10,362 11,926
Change in Net Assets
Governmental activities (1,018) 3,363
Total primary government $ (1,018) $ 3,363
Source: CAFR
87
City of Saratoga
Governmental Activities Tax Revenues by Source
Last Two Fiscal Years
(accrual basis of accounting)
(amounts expressed in thousands)
Fiscal Year
2005 2006
Property Taxes $ 4,841 $ 5,652
Special Assessment 302 348
Voters Approved Property Taxes 1,174 1,021
Sales Taxes 1,011 988
Local Taxes 1,143 1,288
Motor Vehicle In-lieu 420 718
Franchise Tax 995 1,040
Total $ 9,886 $ 11,055
Source: City of Saratoga
88
City of Saratoga
Fund Balances of Governmental Funds
Last Two Fiscal Years
(modified accrual basis of accounting)
(amounts expressed in thousands)
Fiscal Year
2005 2006
General Fund
Reserved $ - $ 1
Unreserved 6,976 10,378
Total General Fund $ 6,976 $ 10,379
All other governmental funds
Reserved $ 855 $ 865
Unreserved,reported in:
Special revenue funds 201 919
Debt service funds - -
Capital Project funds 5,322 3,586
Total all other governmental funds $ 6,378 $ 5,370
Source: CAFR
89
City of Saratoga
Changes in Fund Balances of governmental funds
Last Two Fiscal Years
(modified accrual basis of accounting)
(amounts expressed in thousands)
Fiscal Years
2005 2006
Revenues
Property Taxes $ 6,304 $ 7,022
Other Local Taxes 1,862 2,275
Licenses and permits 100 79
Fines and forfeitures 162 259
Intergovernmental-State 1,375 2,660
Intergovernmental-Federal 90 -
Intergovernmental-Other 671 976
Franchise Fees 1,294 1,041
Use of money and property 664 752
Other Revenues 153 1,719
Current Service Charge 3,093 2,715
Total Revenues 15,768 19,498
Expenditures
General Government 3,238 3,346
Public Safety 3,731 3,423
Environmental Services 379 462
Public Works 2,220 3,039
Community Services 1,875 1,210
Community Development 1,990 1,847
Capital Outlay 1,777 2,908
Debt Service
Principal 255 270
Interest 766 760
Bond Issuance Cost
Total Expenditures 16,231 17,265
Excess of revenues
over(under)expenditures (463) 2,233
Other financing sources (uses)
Transfers in 2,492 499
Transfers out (2,492) (499)
Total other financing sources(uses) - -
Net change in fund balances $ (463) $ 2,233
Debt as a percentage of noncapital
expenditures 7.06% 7.17%
Source: CAFR
90
City of Saratoga
Governmental Activities Tax Revenues by Source
Last Two Fiscal Years
(modified accrual basis of accounting)
(amounts expressed in thousands)
Fiscal Year
2005 2006
Property Taxes $ 4,841 $ 5,652
Special Assessment 302 348
Voters Approved Property Taxes 1,174 1,021
Sales Taxes 1,011 988
Local Taxes 1,143 1,288
Motor Vehicle In-lieu 420 718
Franchise Tax 995 1,040
Total $ 9,886 $ 11,055
Source: City of Saratoga
91
City of Saratoga
Assessed Value and Estimated Actual Value of Taxable Property
Last Two Fiscal Years
(amounts expressed in thousands)
Fiscal Total
Year Total Less: Total Taxable Direct
Ended Residental Commerical Industrial Institu- Vacant Other Unsecured Assessed Tax Exempt Assessed Tax
June 30 Property Property Property tional Land Property Property Value Real Property Value Rate
2005 $ 7,114,095 $ 166,071 $ 8,746 $ 33,509 $ 70,276 $ 35,127 $ 42,965 $ 7,470,789 $ (76,932) $ 7,393,857 1.0560
2006 7,883,965 177,149 8,921 38,027 90,611 32,858 46,874 8,278,405 (133,951) 8,144,454 1.0529
Source: HdL Coren&Cone,Santa Clara County Assessor 2005/2006 Combined Tax Rolls
Other Property includes: Irrigated,Dry Farm,Recreational,Government,SBE Nonunitary,Unknown
&Miscellanous
92
City of Saratoga
Property Tax Rates
Direct and Overlapping Governments
Last Two Fiscal Years
Fiscal Year
2005 2006
Direct Rates
County 1.04120 1.04120
City 0.01484 0.01170
Special District
Santa Clara Valley Water District-State Water Project 0.00860 0.00690
Santa Clara Valley Water District-Zone W-1 0.00060 0.00090
Saratoga Fire Protection District 0.00170 0.00520
Overlapping Rates
Campbell School District 0.05290 0.05120
Cupertino Elementary School District 0.03600 0.03500
Moreland Elementary School District 0.06120 0.05610
Saratoga School District 0.03610 0.03560
Campbell Union High School District 0.01970 0.02240
Fremont Union High School District 0.02680 0.02600
Los Gatos-Saratoga Joint Union High School District 0.04090 0.03710
Foothill-DeAnza Community College District 0.01290 0.01190
West Valley-Mission Community College District - 0.14000
Source: Caifornia Municipal Statistics,Inc
93
City of Saratoga
Principal Property Taxpayers
June 30, 2006
(amounts expressed in thousands)
2005 2006
of Total %of Total
Taxable Taxable Taxable Taxable
Assessed Assessed Assessed Assessed
Taxpayer Primary Use Value Rank Value Value Rank Value
Cupertino Village Associates LLC Commercial $ 19,850 1 0.24%
Quito Village Group LLC Commercial $ 16,640 2 0.23% 16,973 2 0.21%
John M.Sobrato Residental 16,299 3 0.20%
Gregpenn Property Residental 14,280 4 0.18%
San Jose Water Works Miscellaneous 9,904 4 0.13% 10,778 5 0.13%
Coyote Properties LLC Vacant Land 10,197 6 0.13%
David L.House Vacant Land 8,872 9 0.12% 9,773 7 0.12%
Argonaut Associates LLV Commercial 11,427 3 0.15% 9,710 8 0.12%
Ashok Krishnamurthi,Et.AI. Residental 9,644 9 0.12%
David J. &Terri E.Morrison Commercial 9,606 5 0.13% 9,791 10 0.12%
Public Storage Props IX Inc Commercial 8,530 10 0.12%
Saratoga Office Center Partners LLC Commercial 19,300 1 0.26%
David C. &Roxanne N.Peterschmidt Residental 9,173 7 0.12%
Deloise A.Jordan Residental 9,020 8 0.12%
Total 102,472 127,295
Assessed value 7,393,858 8,144,454
Source: HdL Coren&Cone,Santa Clara County Assessor 2005/2006 Combined Tax Rolls
94
City of Saratoga
Property Tax Levies and Collections
Last Two Fiscal Years
(amounts expressed in thousands)
Fiscal Year Total Tax Collected within the Collections in
Ended Levy for Fiscal Year of the Levy' Subsequent Total Collections to Date
June 30 Fiscal Year Amount Percentage Years' Amount Percentage
2005 $ 4,972,875 $ 4,839,668 97% 133,207 $ 4,972,875 3%
2006 5,243,038 5,112,766 98% 130,272 5,243,038 2%
Source: County of Santa Clara Assessor Office
Note: 1 Information presented differs from the information required per GASB 44.
Data for deliquent tax collections by levy year is not available from the County
of Santa Clara Assessor's Office.
Data for the collections in subsequent years represents total deliquent amount received
during the fiscal year. It does not reflect the actual fiscal year of the tax levy.
95
City of Saratoga
Ratios of Outstanding Debt by Type
Last Two Fiscal Years
(amounts expressed in thousands,except per capita amount)
Fiscal Year
2005 2006
Governmental Activities
General Obligation Bonds $ 14,440 $ 14,170
Special Assessment Bonds - -
Capital Leases - -
Total Primary Government $ 14,440 $ 14,170
Percentage of Personal Income N/A N/A 1
Per Capita 468 460
Source:CAFR
Note:1.Information for the City of Saratoga not available
96
City of Saratoga
Ratios of General Bonded Debt Outstanding
Last Two Fiscal Years
(amounts expressed in thousands, except per capita amount)
Fiscal Year
2005 2006
General Obligation Bonds $ 14,440 $ 14,170
Less Amount Available in Debt Service Fund (855) (865)
Total $ 13,585 $ 13,305
Percentage of Estimated Actual Taxable Value of Property 0.18% 0.16%
Per Capita 440 431
Source:CAFR&California Municipal Statistics,Inc
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City of Saratoga
Direct and Overlaping Governmental Activities Debt
As of June 30,2006
(amounts expressed in thousands)
Estimated
Estimated Share of
Debt Percentage Overlapping
Outstanding Applicable Debt
Overlapping Tax and Assessment Debt:
Foothill-De Anza Community College District $ 240,260 1.809% $ 4,346
West Valley Community College District 100,000 11.919% 11,919
Campbell Union High School District 92,240 5.813% 5,362
Fremont Union High School District 138,590 3.851% 5,337
Los Gatos-Saratoga Joint Union High School District 70,355 41.204% 28,989
Campbell Union School District 92,135 7.501% 6,911
Cupertino Union School District 124,045 6.397% 7,935
Moreland School District 104,521 12.984% 13,571
Saratoga Union School District 54,495 85.598% 47,036
Saratoga Fire Protection District 5,684 97.509% 5,542
City of Saratoga 14,170 100.000% 14,170
City of Saratoga 1915 Act Bonds 40 100.000% 40
Santa Clara Valley Water District Benefit Assessment District 183,850 3.767% 6,926
Total Overlapping Tax and Assessment Debt $ 1,220,385 $ 158,085
Direct and Overlapping General Fund Debt:
Santa Clara County General Fund Obligations $ 920,595 3.767% $ 34,679
Santa Clara County Board of Education Certificates of Participation 17,170 3.767% 647
Foothill-DeAnza Community College District Certificates of Participation 20,440 1.809% 370
West Valley Community College District Certificates of Participation 35,910 11.919% 4,280
Los Gatos-Saratoga Joint Union High School District Certificates of Participation 4,170 41.204% 1,718
Cupertino Union School District Certificates of Participation 4,520 6.397% 289
Saratoga Union School District Certificates of Participation 7,360 85.598% 6,300
Midpeninsula Regional Open Space Park District General Fund Obligations 111,690 6.608% 7,380
Total Direct and Overlapping General Fund Debt $ 1,121,855 $ 55,663
Combined Total Debt $ 2,342,240 $ 213,748 1
'Excludes tax and revenue anticipation notes,enterprise revenue,mortgage revenue and tax allocation bonds and non-bonded capital lease obligations.
Note:Overlapping governments are those that coincide,at least in part,with the geographic boundaries of the City.This schedule estimates the portion of
the outstanding debt of those overlapping governments that is home by the residents and businesses of the City of Saratoga.This process recognizes that,
when considering the government's ability to issue and repay long-term debt,the entire debt burden borne by residents and businesses should be taken
into account.However,this does not imply that every taxpayer is a resident,and therefore responsible for repaying the debt,of each overlapping
government.
Source: California Municipal Statistics,Inc.
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City of Saratoga
Legal Debt Margin Information
Last Two Fiscal Years
(amounts expressed in thousands)
Fiscal Year
2005 2006
Debt Limit $ 1,120,618.4 $ 1,241,760.8
Total net debt applicable to limit 13,585 13,305
Legal debt margin 1,107,033 1,228,456
Total net debt applicable to the limit
as a percentage of debt limit 1.21% 1.07%
Legal Debt Margin Calculation
Assessed value' 7,393,857 8,144,454
Add back:exempt real property' 76,932 133,951
Total assessed value' 7,470,789 8,278,405
Debt limit(15% of total assessed value) 1,120,618 1,241,761
Debt applicable to limit:
General obligation bonds 14,440 14,170
Less:Amount set aside for repayment of general obligation debt (855) (865)
Total net debt applicable to limit 13,585 13,305
Legal debt margin $ 1,107,033.4 $ 1,228,455.8
Note:Under state finance law,the City's outstanding debt should not exceed 15 percent of total assessed property value.
By law, the general obligation debt subject to the limitation may be offset by amounts set aside for repaying general
obligation bonds.
'Source: Santa Clara County
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City of Saratoga
Demographic and Economic Statistics
Last Two Fiscal Years
Per
Capita
Fiscal City Personal Income Personal Labor Unemployment
Year Population 1 (in thousands) 2 Income 2 Force 3 Rate 3
2005 30,850 88,404 50,373 12,600 2.5%
2006 30,835 N/A N/A 12,700 2.1%
Notes:
1 Source:State of California Department of Finance
2 Information for the City of Saratoga information not available.
Personal income and per Capita Personal Income for the San Jose-Sunnyvale-Santa Clara Metropolitan area
Source:http://www.bea.gov/bea
3 Annual Average.Source is EDD http://www.labormarketinfo.edd.ca.aov
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City of Saratoga
Principal Employers
Last Two Fiscal Year
2005 2006
Percentage Percentage
of Total City of Total City
Employer Employees Rank Employmene Employees Rank Employment
Gene's Fine Foods 85 1 1.39% 85 1 1.39%
Safeway 65 2 1.06% 65 2 1.06%
Saratoga Country Club 65 3 1.06% 65 3 1.06%
24 Hour Fitness 30 4 0.49% 30 4 0.49%
Windemere SVP 27 5 0.44% 27 5 0.44%
Longs Drugs 20 6 0.33% 20 6 0.33%
Classic Car Wash 20 7 0.33% 20 7 0.33%
Harmonie European Day Spa 20 8 0.33% 20 8 0.33%
Hinshaw,Draa&Marsh 20 9 0.33% 20 9 0.33%
Bella Saratoga 20 10 0.33% 20 10 0.33%
Jakes of Saratoga 20 11 0.33% 20 11 0.33%
La Fondue 20 12 0.33% 20 12 0.33%
The Plumed Horse 20 13 0.33% 20 13 0.33%
Viaggio 20 14 0.33% 20 14 0.33%
Source:
California Employment Development Department,Labor Market Information Division
www.labormarketinfo.edd.ca.gov
Per Janice at EDD-Total average employment 3rd Qtr.2005 6129
City of Saratoga Business License database
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City of Saratoga
Full-Time Equivalent City Government Employees by Function
Last Two Fiscal Years
Fiscal Year
Function 2005 2006
General Government 12.65 10.75
Public Works 20.80 20.75
Community Development 13.00 13
Parks And Recreation 10.30 10.35
Total 56.75 54.85
Source: City of Saratoga Budget Document
102
City of Saratoga
Operating Indicators by Function
Last Two Fiscal Years
Fiscal Year
2005 2006
Function
Public Safety
Part 1 crimes' 463 426
Total Incidents 42,011 40,567
Police reports 1,767 1,659
Public Works
Street resurfacing(miles) N/A 5
Street lights repaired 2 3
Potholes filled(sq.ft.) N/A 5,000
Community Development
Total permit valuation 3($000) 74,668 94,485
Parks and Recreation
Classes,Trips(enrollment)Community events 6,579 6,458
Sports Programs(e.g.basketball,softball) 470 473
Child Care programs(Enrollment) 189 163
Day/Summer Camps(Enrollment) 301 287
Teen/Youth Council(Enrollment) 2,506 3,798
Danc3e Program(Four quarters) 432 452
Senior Center(Enrollment/attendance days) 22,312 22,591
Notes:Indicators are not available for the general government function.
'Part 1 Crimes are the following as reported to DOJ:homicide,rape,robbery, burglary,assault,theft,auto theft,
and arson.
Source:City of Saratoga various records
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City of Saratoga
Capital Asset Statistics by Function
as of June 30, 2006
Function 2005 2006
Public Safety
Police Station 1 1
Fire Station
Saratoga Fire District 1 1
Central Fire District 1 1
Public Works
Streets Miles-Private 13 13
Streets Miles-Public 137 137
West Valley Sanitation District
Number of Connections 8601 8621
Length of Sewer Lines 20 20
Cupertino Sanitation District
Number of Connections 2118 2118
Length of Sewer Lines 36 36
Parks and Recreation
Parks acreage 81 81
Parks 15 15
Source:City of Saratoga various records
Note:No capital asset indicators are available for the general government or community development functions.
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