Comprehensive Annual Financial Report
Prepared by the Department of Financial Services
Fiscal Year Ended June 30, 2004
California
City of Foster City and
Estero Municipal Improvement District
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
CALIFORNIA
Comprehensive Annual Financial Report
Prepared by the Department of Financial Services
For the Fiscal Year Ended June 30, 2004
Marland W. Townsend, Mayor
Rick Wykoff, Vice Mayor Linda Koelling, Councilmember
Ron Cox, Councilmember Deborah E. G. Wilder, Councilmember
James C. Hardy, City Manager/ City Treasurer
Kristi A. Chappelle, Assistant City Manager Jean Savaree, City Attorney
Ricardo G. Santiago, Finance Director John Lisenko, Public Works Director
Audrey Daniels, Human Resources Director Randy J. Sonnenberg, Police Chief
Kevin Miller, Parks & Recreation Director Tom Reaves, Fire Chief
Richard Marks, Community Development Director Therese Tesene, City Clerk
Steve Toler, Administrative Services Director
Cover page photographed by Robin Woodman, Building Inspector
INTRODUCTORY
SECTION
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CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
For the Fiscal Year Ended June 30, 2004
Table of Contents
Page( s)
Introductory Section:
Table of Contents .............................................................................................................................. i- iii
Letter of Transmittal ......................................................................................................................... v- ix
CSMFO Certificate of Award for
Outstanding Financial Reporting for 2003.......................................................................................... x
GFOA Certificate of Achievement for
Excellence in Financial Reporting for 2003....................................................................................... xi
Organization Chart.......................................................................................................................... ... xii
Financial Section:
Independent Auditor’s Report............................................................................................................ 1- 2
Management’s Discussion and Analysis ( Required Supplementary Information) .......................... 3- 11
Basic Financial Statements:
Government- wide Financial Statements:
Statement of Net Assets ................................................................................................................... 13
Statement of Activities................................................................................................................. 14- 15
Governmental Funds:
Balance Sheet .............................................................................................................................. 16- 17
Reconciliation of the Balance Sheet to Statement
of Net Assets - Governmental Activities......................................................................................... 19
Statement of Revenues, Expenditures and Changes in Fund Balances........................................ 20- 21
Reconciliation of the Statement of Revenues, Expenditures and
Changes in Fund Balances of Governmental Funds to
Statement of Activities - Governmental Activities ......................................................................... 23
Proprietary Funds:
Statement of Fund Net Assets ........................................................................................................... 25
Statement of Revenues, Expenses and
Changes in Fund Net Assets ........................................................................................................... 26
Statement of Cash Flows................................................................................................................... 27
Notes to the Basic Financial Statements ........................................................................................ 29- 57
Other Required Supplementary Information:
Budgetary Comparison Schedule:
General Fund........................................................................................................................... .... 59- 60
Note to Required Supplementary Information .................................................................................. 61
Other Supplementary Information:
Nonmajor Governmental Funds
Combining Balance Sheet ................................................................................................................. 63
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances .............................................................................................................. 64
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CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
For the Fiscal Year Ended June 30, 2004
Table of Contents ( Continued)
Page( s)
Other Supplementary Information ( Continued):
Nonmajor Special Revenue Funds:
Combining Balance Sheet .......................................................................................................... 66- 67
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances ....................................................................................................... 68- 69
Budgetary Comparison Schedules:
Traffic Safety ............................................................................................................................... 70
Measure A ............................................................................................................................... ..... 71
Gas Tax ............................................................................................................................... ......... 72
SLESF/ COPS Grant...................................................................................................................... 73
COPS More Grant ......................................................................................................................... 74
CLETEP Grant.......................................................................................................................... ... 75
California Law Enforcement Equipment ...................................................................................... 76
Traffic Congestion Relief.............................................................................................................. 77
California Opportunities................................................................................................................ 78
Nonmajor Debt Service Funds:
Combining Balance Sheet .......................................................................................................... 80- 81
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances ....................................................................................................... 82- 83
Budgetary Comparison Schedules:
Metro Center Special Assessment Bonds...................................................................................... 84
Tax Allocation Refunding Bonds.................................................................................................. 85
1961 Land Reclamation Bonds ..................................................................................................... 86
1964 Land Reclamation Bonds ..................................................................................................... 87
1967 Land Reclamation Bonds ..................................................................................................... 88
1970 Land Reclamation Bonds ..................................................................................................... 89
1961 Lighting, Drainage and Street Improvement Bonds............................................................. 90
1972 Lighting, Drainage and Street Improvement Bonds............................................................. 91
1961 Park Bonds ........................................................................................................................... 92
Fire Station Bonds......................................................................................................................... 93
Vintage Park Special Assessment Bonds ...................................................................................... 94
Metro Center Senior Homes Tax Allocation Bonds ..................................................................... 95
Permanent Fund:
Budgetary Comparison Schedule:
Green Area Maintenance............................................................................................................... 97
Internal Service Funds:
Combining Statement of Fund Net Assets ...................................................................................... 99
Combining Statement of Revenues, Expenses and Changes in Fund Net Assets ......................... 100
Combining Statement of Cash Flows..................................................................................... 102- 103
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CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
For the Fiscal Year Ended June 30, 2004
Table of Contents ( Continued)
Page( s)
Statistical Section:
General Governmental Expenditures By Function................................................................... 105
General Governmental Revenues By Source............................................................................ 106
General Governmental Taxes Detail......................................................................................... 107
Secured Property Tax Levies and Collections.......................................................................... 108
Assessed and Estimated Actual Values of Taxable Property ................................................... 109
Special Assessments - Billings and Collections ....................................................................... 110
Property Tax Rates - Direct and Overlapping Governments.................................................... 111
Computation of Legal Debt Margin ......................................................................................... 112
Ratio of Net General Bonded Debt to Assessed Value and
Net General Bonded Debt Per Capita..................................................................................... 113
Computation of Direct and Overlapping Bonded Debt ............................................................ 114
Ratio of Annual Debt Service Expenditures For
General Bonded Debt to Total General Expenditures ............................................................ 115
Debt Service Coverage By Sewer Fund Revenues................................................................... 116
Demographic Statistics ............................................................................................................. 117
Property Tax Values, Construction and Bank Deposits ........................................................... 118
Principal Taxpayers .................................................................................................................. 119
Demographic and Miscellaneous Statistical Information ......................................................... 120
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This Page Left Intentionally Blank
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October 15, 2004
Honorable Mayor and Members of the City Council
and Citizens of Foster City
City of Foster City, California
COMPREHENSIVE ANNUAL FINANCIAL REPORT
The Comprehensive Annual Financial Report ( CAFR) of the City of Foster City ( the City) and the Estero
Municipal Improvement District ( the District) for the fiscal year ended June 30, 2004 is hereby submitted.
This report was prepared by the Financial Services Department, which is responsible for both the accuracy of
the presented data and the completeness and fairness of the presentation, including all disclosures. We
believe the data, as presented, are accurate in all material aspects and presented in a manner designed to fairly
set forth the financial position and results of operations of the City and District as measured by the financial
activity of its various funds, and that all disclosures necessary to enable the reader to gain the maximum
understanding of the City and District’s financial affairs have been included.
The City/ District prepared the Comprehensive Annual Financial Report ( CAFR) using the financial reporting
requirements as prescribed by the Governmental Accounting Standards Board ( GASB) Statement No. 34,
Basic Financial Statements – Management’s Discussion and Analysis – for State and Local Governments.
This GASB Statement requires that management provide a narrative introduction, overview and analysis to
accompany the basic financial statements in the form of a Management’s Discussion and Analysis ( MD& A).
This letter of transmittal is designed to complement the MD& A and should be read in conjunction with it.
The MD& A can be found immediately following the report of the independent auditors.
The CAFR is organized into three sections:
• The Introductory Section is intended to familiarize the reader with the organizational structure of the
City/ District, the nature and scope of the services it provides, and the specifics of its legal operating
environment.
• The Financial Section includes the MD& A, the basic financial statements including notes and the other
required supplementary information. The basic financial statements include the government- wide
financial statements that present an overview of the City/ District’s entire financial operations and the fund
financial statements that present the financial information of each of the City/ District’s major funds, as
well as nonmajor governmental and other funds. Also included in this section is the independent
auditor’s report on the financial statements and schedules.
• The Statistical Section contains comprehensive statistical data on the City/ District’s financial, physical,
economic, social and political characteristics.
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THE REPORTING ENTITY
The City of Foster City ( the City) was officially incorporated on April 27, 1971 with the newly elected City
Council also serving as the Board of Directors for the Estero Municipal Improvement District ( the District).
The City is a general law city, and has a Council- Manager form of government and provides a full range of
municipal services including police, fire, public works ( lagoons, levees, streets, maintenance, sewer, water
and public improvements), parks and recreation, community development ( planning, zoning, building and
redevelopment) and general administrative services.
The Estero Municipal Improvement District ( the District) was created by the California State Legislature in
1960 as a general- purpose district with municipal powers, including the power to issue municipal bonds. The
District issued over $ 80 million in bonds to provide the infrastructure for a new, master planned- community,
which was to be built on what then was a dairy farm and salt ponds adjacent to the San Francisco Bay. The
bond proceeds were used to fill and reclaim the land and to finance construction of a man- made lagoon for
storm drainage and recreation, a water system, a sewer system, a street system which included roads, bridges
and street lights, a parks system and a fire station. The first residents of this new community moved into their
homes in 1964.
The Community Development Agency was created by ordinance in May, 1981, under the provisions of Part I
( commencing with Section 33000) of Division 24 of Health and Safety Code of the State of California ( the
Community Redevelopment Law) primarily to eliminate and reduce many aspects of economic, physical, and
social blight existing within the City of Foster City and the Estero Municipal Improvement District due to
large, undeveloped tracts of land whose development were essential to the completion of the master- planned
community. These parcels were included within the boundaries of the Foster City Community Development
Project Area ( the Project Area), and goals and objectives were set forth in the redevelopment plan ( the Plan)
for the Project Area which was adopted by ordinance in November 1981.
The CAFR includes the funds of the primary government, which includes several enterprise activities that are
not considered separate legal entities, as well as all of its component units. Component units include legally
separate entities for which the primary government is financially accountable and that have substantially the
same board as the City/ District and provide services entirely to the City/ District.
ECONOMIC CONDITIONS AND OUTLOOK
The City/ District is an area that has very high property values with median home prices in the amount of
$ 700,000 and significant economic vitality. Property taxes continue to be the primary source for the
City/ District, contributing 41% of the General Fund revenues. Growth in assessed valuation of taxable
property has increased by 4% from the prior year. The City’s other major revenue sources are sales tax,
investment income, motor vehicle in lieu fees, charges for current services, transient occupancy tax, and
licenses and permits.
Since 1980, several major commercial and industrial developments have been completed, adding a substantial
daytime population to the City/ District, and providing employment opportunities to City/ District residents.
Based on a survey of businesses in the City/ District, staff determined that the existing businesses employ
approximately 20,180 people.
On December 2000, the City/ District approved a use permit for the construction of North Peninsula Jewish
Campus ( NPJC) community center, approximately 145,000 sq ft. of recreational, cultural and educational
facilities in the 12 acres of the Foster City Civic Center Campus. The NPJC leases this land from the
City/ District, which is bounded by Shell Boulevard, Foster City Boulevard, and the Fosters Landing
apartment development. During fiscal year 2004, the developer completed phase I of the project. Phase II of
the community center is underway which will provide the City/ District with amenities; such as a cultural arts
facility with 500 seating capacity, a K- 5 school for 250 students, an early childhood education facility for 300
students, a fitness center including one indoor swimming pool, two outdoor swimming pools, an adult
classroom, and a teen center.
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The Visa IV project is the fourth building for the Visa International Organization whose home office is
headquartered in Foster City. Visa IV project was completed in December 2003 and the completion of the
Visa IV project and NPJC community center will provide the City/ District additional property value tax base.
MAJOR INITIATIVES
FOR THE YEAR: During the year various projects were undertaken such as the design and construction of
the fourth water storage tank, parallel force main and butterfly valve replacement, wastewater treatment plant
expansion phase II, and continuing projects such as Leo Ryan Park boardwalk/ park improvement, lift station
improvements, park infrastructure improvement phase II, and street resurfacing and repair.
The City/ District completed Phase I of the Leo Ryan Park improvement project in March 2003. Phase I
included a new boardwalk, gazebo, amphitheater stage, concrete sidewalk, light fixtures and electrical
raceway. The City/ District started Phase II of the Leo Ryan Park improvement project in August 2003. Phase
II includes rebuilding the amphitheater seating, demolition of the existing restroom concrete platform and
reconstruction of park pathways and was completed in February 2004. Phase III started in April 2004 which
includes new pathway and plaza areas, upgrades to the landscaping and hardscape, improvement to the
recreation center boathouse storage area, and construction of a hardscape plaza with artwork.
In the fall of 2003, the City/ District completed the Council Chamber building, the last phase of the
Government Center Project. In December 2003, the City/ District completed the Lagoon Dredging Project.
This project consists of removing approximately 110,000 cubic yards of accumulated sediment from portions
of the Lagoon’s main channel and bench, and transporting and depositing the material into the former salt
pond basin adjacent to Sea Cloud Park.
During fiscal year 2003- 2004, the City/ District initiated the residential street resurfacing project. This project
consists of resurfacing and slurry sealing numerous streets throughout the City and was funded by Measure A
and Gas Tax funds. The City’s public works department designed the project in- house. In May 2003, City
Council approved the plans and specifications and authorized the call for bids for this project. In June 2003,
the City Council authorized the award of contract to G. Bartolotto & Company, Inc. for construction of the
project. Construction began for this $ 1.4 million project in August 2003 and finished in October 2003.
Since February 2003, the City/ District provided the Auto Pay service to all utility customers. Utility
customers can save time and money when they pay their water and sewer bill by having the City/ District
automatically deduct the total amount of their water and sewer bill from a checking or savings account at a
bank, credit union, or savings and loan.
ACCOUNTING AND BUDGETING SYSTEMS
The City/ District's financial picture is more readily understood with a general introduction to our accounting
and budgeting systems. These systems provide the means for allocation of available resources and for the
proper control and recording of revenues and expenditures.
As part of our ongoing effort to maintain fiscal stewardship and financial accountability, the City/ District uses
a fully computerized accounting system. Modifications and enhancements have been made continuously to
the accounting system to keep abreast of changing accounting techniques and principles. In developing and
evaluating the City/ District’s accounting system, consideration is given to the adequacy of internal controls.
Internal controls are designed to provide reasonable, but not absolute, assurance regarding: ( 1) the
safeguarding of assets against loss from unauthorized use or disposition; and ( 2) the reliability of financial
records for preparing financial statements and maintaining accountability for assets. The concept of
reasonable assurance recognizes that: ( 1) the cost of a control should not exceed the benefits likely to be
derived; and ( 2) the evaluation of costs and benefits requires estimates and judgments by management. All
internal control evaluations occur within the above framework. The City/ District's internal accounting
viii
controls are designed to adequately safeguard assets and provide reasonable assurance of proper recording of
financial transactions.
The City/ District's budget is a detailed operating plan, which identifies estimated costs and results in relation
to estimated revenues. The budget includes ( 1) the programs, projects, services, and activities to be carried on
during the fiscal year; ( 2) the estimated revenue available to finance the operating plan; and ( 3) the estimated
spending requirements of the operating plan. The budget represents a process where policy decisions by the
City Council/ Board of the District are made and then implemented.
In addition to internal controls, the City/ District also maintains budgetary controls. The objective of these
budgetary controls is to ensure compliance with legal provisions embodied in the annual appropriated budget
approved by the City Council/ Board of Directors. The City/ District is required to adopt annual budgets on or
before June 30th, for the ensuing fiscal year for the General Fund, Special Revenue Funds, Debt Service Funds
and the Permanent Fund. From the effective date of the budget, the amounts stated therein as proposed
expenditures become appropriations to the various departments.
The City Council and District Board of Directors may amend the budget by resolution. The City Manager
may transfer appropriations from one program, activity, or object to another within a department. All
appropriations lapse at the end of the fiscal year. The budget is adopted at the character level of expenditure
within departments. As described above, the City Manager is authorized to make transfers of excess
appropriations within departments. Accordingly, the lowest level of budgetary control by the City Council
and District Board of Directors is the department level.
The City/ District also maintains an encumbrance accounting system as one technique of accomplishing
budgetary control. Encumbered amounts lapse at the year- end.
CASH MANAGEMENT
The City/ District's pooled deposits and investments are invested pursuant to policy established by the City
Treasurer and approved by the City Council/ Board of Directors which seeks preservation of capital, liquidity
and yield, in that order of priority. The policy addresses soundness of financial institutions holding our assets
and the types of investments permitted by the California Government Code. The earned yield for the current
fiscal year was 2.24%.
RISK MANAGEMENT
The City/ District, along with 28 other cities, is a member of the ABAG PLAN Corporation, which provides
liability insurance coverage. The City/ District, along with four other cities, is also a member of the San
Mateo County Cities Insurance Group, which provides workers' compensation insurance coverage. Both of
the insurance groups provide claims management services and legal defense to each participating member.
OTHER FINANCIAL INFORMATION
The City/ District contributes to the California Public Employees' Retirement System ( CALPERS) that acts as
a common investment and administrative agent for many participating public entities within the State of
California. The City/ District's most recent actuarial valuation indicates that the total actuarial value of assets
i s $ 74,215,478 of which $ 12,691,675 represents unfunded liability.
SPENDING LIMITATION
The City/ District anticipates no difficulty in the foreseeable future in complying with the spending limitation
under Article XIII of the California Constitution. The appropriations subject to this spending limitation for
FY 2003- 2004 were approximately 42.74 % of the total spending limitation.
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MUNICIPAL SERVICES
The City/ District continues to provide a wide range of services to its citizens including:
• Upgrading and maintaining the street system, resurfacing, and modifying of traffic signals at various
locations;
• Providing police services at a low per capita cost while maintaining a very low crime rate within the
community through neighborhood watch programs and community- oriented policing;
• Providing various safety programs designed to protect the lives and property of the citizens of Foster
City;
• Improving and increasing leisure and recreational programs; developing new programs in order to meet
the community needs, and making Foster City a more enjoyable place to live through entertaining
activities, clean facilities, and a safe atmosphere;
• Guiding City/ District development while maintaining and protecting its physical environment, and
overseeing the proposed development of structure and facilities; and assessing cost effective delivery of
services provided by all City/ District departments.
INDEPENDENT AUDIT
The City/ District requires that its financial statements be audited annually by an independent certified public
accountant selected by the City Council/ District Board. The City/ District has contracted with Macias, Gini &
Company LLP to conduct the audit for FY 2003- 2004 and the independent auditor's opinion is included in this
report.
In addition, the City/ District is required to file financial and operational information to the Federal
Government, State of California and the County of San Mateo. All required reporting have been filed in a
timely manner.
AWARDS
The Government Finance Officers Association ( GFOA) and the California Society of Municipal Finance
Officers ( CSMFO) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of
Foster City and Estero Municipal Improvement District for the year ended June 30, 2003. In order to be
awarded a Certificate of Achievement, the City/ District published an easily readable and efficiently organized
Comprehensive Annual Financial Report. This report satisfied both accounting principles generally accepted
in the United States of America and applicable legal requirements. The Certificate of Achievement is valid
for a period of one year. We believe our current Comprehensive Annual Financial Report continues to meet
the Certificate of Achievement Program's requirements and we are submitting it to the GFOA and CSMFO to
determine its eligibility for another certificate.
ACKNOWLEDGEMENTS
The preparation of the report in a timely manner is the result of the dedicated service of the members of the
Financial Services Department to whom I wish to express my appreciation especially Lin- Lin Cheng and Fiti
Rusli. I would like to thank the auditors from Macias, Gini & Company LLP for their invaluable professional
assistance.
I also wish to express my thanks to the Mayor and members of the City Council, the City Manager, and the
Audit Committee for their interest and support towards conducting the financial operations of the City/ District
in a responsible and progressive manner.
Respectfully submitted,
Ricardo G. Santiago
Finance Director
FINANCIAL
SECTION
1
Honorable Mayor and Members of the City
Council of the City of Foster City and
Board of Directors of the Estero Municipal
Improvement District, California
Independent Auditor’s Report
We have audited the accompanying financial statements of the governmental activities, the business- type
activities, each major fund, and the aggregate remaining fund information of the City of Foster
City/ Estero Municipal Improvement District, California ( City/ District), as of and for the year ended
June 30, 2004, which collectively comprise the City/ District’s basic financial statements as listed in the
table of contents. These financial statements are the responsibility of the City/ District’s management.
Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used
and the significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business- type activities, each major fund,
and the aggregate remaining fund information of the City of Foster City/ Estero Municipal Improvement
District, California, as of June 30, 2004, and the respective changes in financial position and cash flows,
where applicable, thereof for the year then ended in conformity with accounting principles generally
accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated
October 1, 2004, on our consideration of the City/ District’s internal control over financial reporting and
on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and
other matters. The purpose of that report is to describe the scope of our testing of internal control over
financial reporting and compliance and the results of that testing, and not to provide an opinion on the
internal control over financial reporting or on compliance. That report is an integral part of an audit
performed in accordance with Government Auditing Standards and should be considered in assessing the
results of our audit.
2
The management’s discussion and analysis and the general fund budgetary comparison schedule are not a
required part of the basic financial statements but are supplementary information required by accounting
principles generally accepted in the United States of America. We have applied certain limited
procedures, which consisted principally of inquiries of management regarding the methods of
measurement and presentation of the required supplementary information. However, we did not audit the
information and do not express an opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City/ District’s basic financial statements. The introductory section, other supplementary
information, and statistical section are presented for purposes of additional analysis and are not a required
part of the basic financial statements. The other supplementary information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and, in our opinion is 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.
Certified Public Accountants
Walnut Creek, California
October 1, 2004
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
Management’s Discussion and Analysis
3
This section of the City of Foster City/ Estero Municipal Improvement District’s ( the City/ District)
Comprehensive Annual Financial Report presents a narrative overview and analysis of the City/ District’s
financial activities for the fiscal year ended June 30, 2004. We encourage readers to consider the
information presented here in conjunction with our letter of transmittal.
FINANCIAL HIGHLIGHTS
• The assets of the City/ District exceeded liabilities at the close of the 2003- 2004 fiscal year by
$ 226,987,907 ( net assets). Of this amount, $ 83,284,078 ( unrestricted net assets) may be used to meet
the City/ District’s ongoing obligations to citizens and creditors, $ 22,675,293 is restricted for specific
purposes ( restricted net assets), and $ 121,028,536 is invested in capital assets, net of related debt.
• The government’s total net assets decreased by $ 1,579,266 during the fiscal year. Governmental
activities account for a decrease in net assets in the amount of $ 2,027,311 and business- type activities
account for an increase in net assets by $ 448,045.
• As of June 30, 2004, the City/ District’s governmental funds reported combined ending fund balances
of $ 49,077,804. Approximately 36% of the combined fund balances, $ 17,438,391, ( unreserved fund
balance) is available to meet the City/ District’s current and future needs.
• At the end of the fiscal year, unreserved fund balance for the General Fund was $ 18,887,235, or 79%
of total general fund expenditures.
• The City/ District’s total long- term obligations decreased by $ 13,812,080 in comparison with the prior
year. The decrease resulted primarily from scheduled principal retirements of bonds.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the City/ District’s basic financial
statements. The City/ District’s basic financial statements comprise three components: 1) Government-wide
financial statements; 2) Fund financial statements; and 3) Notes to the basic financial statements.
This report also contains Required Supplementary Information ( General Fund Budgetary Comparison
Schedule) and other Supplementary Information ( combining financial statements and nonmajor
governmental funds budgetary comparison schedules) in addition to the basic financial statements
themselves.
Government- wide Financial Statements are designed to provide readers with a broad overview of
City/ District finances, in a manner similar to a private- sector business.
The statement of net assets presents information on all of the City/ District’s assets and liabilities, with the
difference between the two reported as net assets. Over time, increases or decreases in net assets may
serve as a useful indicator of whether the financial position of the City/ District is improving or
deteriorating.
The statement of activities presents information showing how the City/ District’s net assets changed
during current fiscal year. All changes in net assets are reported as soon as the underlying event giving
rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are
reported in this statement for some items that will result in cash flows in future fiscal periods, such as
revenues pertaining to uncollected taxes and expenses pertaining to earned but unused vacation and sick
leave.
Both of these government- wide financial statements distinguish functions of the City/ District that are
principally supported by taxes and intergovernmental revenues ( governmental activities) from other
functions that are intended to recover all or in part a portion of their costs through user fees and charges
( business- type activities). The governmental activities of the City/ District include general government,
public safety, public works, community development, and parks and recreation. The business- type
activities of the City/ District include water, sewer and public transportation operations.
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
Management’s Discussion and Analysis
4
Fund Financial Statements are designed to report information about groupings of related accounts,
which are used to maintain control over resources that have been segregated for specific activities or
objectives. The City/ District, like other state and local governments, uses fund accounting to ensure and
demonstrate finance- related legal compliance. All of the funds of the City/ District can be divided into
two categories: governmental funds and proprietary funds.
Governmental funds are used to account for essentially the same functions reported as governmental
activities in the government- wide financial statements. However, unlike the government- wide financial
statements, governmental funds 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 determining what financial resources are available in the near future to
finance the City/ District’s programs.
The focus of governmental funds is narrower than that of the government- wide financial statements; it is
useful to compare the information presented for governmental funds with similar information presented
for governmental activities in the government- wide financial statements. By doing so, readers may better
understand the long- term impact of the government’s near- term financing decisions. Both the
governmental funds balance sheet and the governmental funds statement of revenues, expenditures and
changes in fund balances provide a reconciliation to facilitate this comparison between governmental
funds and governmental activities.
The City/ District maintains several individual governmental funds organized according to their type
( special revenue, debt service, capital projects and permanent funds). Information is presented separately
in the governmental funds balance sheet and in the governmental funds statement of revenues,
expenditures and changes in fund balances for the General Fund; Metro Center Special Assessments
Bonds, Tax Allocation Refunding Bonds, City Capital Projects, and Community Development Agency,
all of which are considered to be major funds. Data from the remaining governmental funds are
combined into a single, aggregated presentation entitled “ other funds”. Individual and combining fund
data for each of these nonmajor governmental funds is provided as other supplementary information in
this report.
Proprietary funds are generally used to account for services for which the City/ District charges customers
– either outside customers, or internal units of departments of the City/ District. Proprietary funds provide
the same type of information as shown in the government- wide financial statements, only in more detail.
The City/ District maintains the following two types of proprietary funds:
• Enterprise funds are used to report the same functions presented as business- type activities in the
government- wide financial statements. The City/ District uses enterprise funds to account for the
water, sewer and transportation operations.
• Internal service funds are used to report activities that provide supplies and services for certain
City/ District programs and activities. The City/ District uses the internal service fund to account for
vehicle and equipment rental, self- insurance, communication and information services and building
maintenance. Since these services predominantly benefit governmental rather than business- type
functions, they have been included within governmental activities in the government- wide financial
statements.
Notes to the Basic Financial Statements provide additional information that is essential to a full
understanding of the data provided in the government- wide and fund financial statements.
The required supplementary information includes the City/ District’s General Fund budgetary
comparison schedule. The City/ District adopts an annual appropriated budget for its General Fund, and a
budgetary comparison schedule has been provided to demonstrate compliance with this budget.
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
Management’s Discussion and Analysis
5
The other supplementary information contains the combining and individual fund statements and
schedules, which provide information for nonmajor governmental funds and the internal service funds, all
of which are presented immediately following the required supplementary information.
GOVERNMENT- WIDE FINANCIAL ANALYSIS
The following table provides a condensed statement of net assets as of June 30, 2004.
Condensed Statement of Net Assets
June 30, 2004
Governmental Activities Business- Type Activities Total Percent
2004 2003 2004 2003 2004 2003 of Change
Current and other assets $ 70,175,257 $ 90,794,560 $ 49,990,199 $ 48,424,946 $ 1 20,165,456 $ 139,219,506 - 13.69%
Capital assets 118,236,449 116,706,809 33,170,358 34,031,097 1 51,406,807 150,737,906 0.44%
Total assets 188,411,706 207,501,369 83,160,557 82,456,043 2 71,572,263 289,957,412 - 6.34%
Current and other liabilities 3,632,988 7,195,388 1,547,696 979,099 5 ,180,684 8,174,487 - 36.62%
Long- term liabilities 37,689,441 51,189,393 1,714,231 2,026,359 3 9,403,672 53,215,752 - 25.95%
Total liabilities 41,322,429 58,384,781 3,261,927 3,005,458 4 4,584,356 61,390,239 - 27.38%
Net assets:
Invested in capital assets,
net of related debt 89,440,178 77,132,726 31,588,358 32,172,097 1 21,028,536 109,304,823 10.73%
Restricted 21,720,965 32,763,978 954,328 941,091 2 2,675,293 33,705,069 - 32.72%
Unrestricted 35,928,134 39,219,884 47,355,944 46,337,397 8 3,284,078 85,557,281 - 2.66%
Total net assets $ 147,089,277 $ 149,116,588 $ 79,898,630 $ 79,450,585 $ 2 26,987,907 $ 228,567,173 - 0.69%
Analysis of Net Assets – As noted earlier, net assets may serve as a useful indicator of a government’s
financial position. For the City/ District, assets exceeded liabilities by $ 226,987,907 at the close of the
current fiscal year. The restricted net assets have decreased by $ 11,029,776 ( 33%) due to the repayment
of a CDA loan in the amount of $ 4,128,738 and a balloon payment of the Estero Bonds in the amount of
$ 6,560,000.
A portion of the City/ District’s net assets ( 37%) represents unrestricted net assets of $ 83,284,078, which
may be used to meet the City/ District’s ongoing obligations to citizens and creditors. Another significant
portion of the City/ District’s net assets of $ 121,028,536 ( 53%) reflects its investment in capital assets
( e. g. land, structures and improvements, infrastructure, and equipment), less any related debt used to
acquire those assets that is still outstanding. The City/ District uses these capital assets to provide services
to citizens; consequently, these assets are not available for future spending. Although the City/ District’s
investment in its capital assets is reported net of related debt, it should be noted that the resources needed
to repay this debt must be provided from other sources, since the capital assets themselves cannot be used
to liquidate these liabilities. An additional portion of the City/ District’s net assets of $ 22,675,293 ( 10%)
represents resources that are subject to external restrictions on how they may be used.
At the end of the current fiscal year, the City/ District reported positive balances in both categories of net
assets, both for the City/ District as a whole, as well as for its business type activities. For governmental
activities, the City/ District reported a positive balance of $ 35,928,134 in unrestricted net assets. For
business- type activities, the City/ District reported a positive balance of $ 47,355,944 in unrestricted net
assets.
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
Management’s Discussion and Analysis
6
The following table indicates the changes in net assets for governmental and business- type activities:
Condensed Statement of Activities
For the Year Ended June 30, 2004
Governmental Activities Business- Type Activities Total Percent
2004 2003 2004 2003 2004 2003 of Change
Program Revenues:
Charges for services $ 3 ,290,422 $ 3 ,373,740 $ 1 1,338,702 $ 1 1,199,155 $ 14,629,124 $ 1 4,572,895 0.39%
Operating grants and contributions 1 ,191,358 1 ,254,714 1,191,358 1 ,254,714 - 5.05%
Capital grants and contributions 7 46,541 1 ,203,787 11,522 2 3,409 758,063 1 ,227,196 - 38.23%
General revenues:
Taxes 2 3,970,846 2 6,879,439 1,942 1 2,016 23,972,788 2 6,891,455 - 10.85%
Contributions not restricted
to specific purposes 5 ,134,632 5 ,394,256 5,134,632 5 ,394,256 - 4.81%
Unrestricted investment and
rental income 6 03,723 1 ,944,840 6 09,432 1 ,670,467 1,213,155 3 ,615,307 - 66.44%
Other 4 77,594 1 31,321 477,594 1 31,321 263.68%
Total revenues 3 5,415,116 4 0,182,097 1 1,961,598 1 2,905,047 47,376,714 5 3,087,144 – 10.76%
Expenses:
General government 2 ,705,217 3 ,959,964 2,705,217 3 ,959,964 - 31.69%
Public safety 1 4,016,691 1 3,125,022 14,016,691 1 3,125,022 6.79%
Public works 6 ,192,009 3 ,951,120 6,192,009 3 ,951,120 56.72%
Community development 6 ,734,993 6 ,445,306 6,734,993 6 ,445,306 4.49%
Parks and recreation 5 ,967,687 5 ,867,155 5,967,687 5 ,867,155 1.71%
Interest on long term debt 2 ,003,449 2 ,496,351 2,003,449 2 ,496,351 - 19.74%
Water operations 6,484,751 5 ,469,601 6,484,751 5 ,469,601 18.56%
Sewer operations 4,640,074 4 ,119,833 4,640,074 4 ,119,833 12.63%
Public transportation 211,109 3 03,992 211,109 3 03,992 - 30.55%
Total expenses 3 7,620,046 3 5,844,918 1 1,335,934 9 ,893,426 48,955,980 4 5,738,344 7.03%
Excess of revenues over
expenses before transfers ( 2,204,930) 4,337,179 625,664 3 ,011,621 ( 1,579,266) 7,348,800 - 121.49%
Transfers 1 77,619 7 26,307 ( 177,619) ( 726,307) - - -
Change in net assets ( 2,027,311) 5 ,063,486 4 48,045 2 ,285,314 ( 1,579,266) 7 ,348,800 - 121.49%
Net assets, beginning of year 1 49,116,588 1 44,053,102 7 9,450,585 7 7,165,271 228,567,173 2 21,218,373 3.32%
Net assets, end of year $ 1 47,089,277 $ 1 49,116,588 $ 79,898,630 $ 7 9,450,585 $ 226,987,907 $ 2 28,567,173 - 0.69%
Key elements of the increase/ decrease in revenues for governmental activities are as follows:
• Charges for services increased by $ 56,229 or 0.39% due to the water and sewer rates increase.
• Operating grants and contributions decreased by $ 63,356 or 5% due to less grants received from State
Department of Transportation as the City has completed various capital improvement projects in the
prior year.
• Capital grants and contributions decreased by $ 469,133 or 38% due to the completion of the street
resurfacing and repair, Bicentennial Bridge Repair and East Third Avenue Traffic Improvement
projects where most of the grants for those capital improvement projects were received last year.
• Taxes decreased by $ 2,918,667 or 11% due to reduced property tax assessments required for debt
service related to the scheduled paydown of the District’s general obligation bonds.
• Contributions not restricted for special purposes decreased by $ 259,624 or 5% due to the decline in
sales tax and motor vehicle in lieu fees.
• Unrestricted investment and rental revenues decreased by $ 2,402,153 or 66% due to the decline in
investment earnings reflecting the City/ District’s decreasing investment holding used to fund the
government center project.
• Other revenues increased by $ 346,273 or 264% due primarily to a one- time ABAG- power
reimbursement in the amount of $ 205,000.
K ey elements of the Increase/ Decrease in expenses for governmental activities are as follows:
• General government expenses decreased by $ 1,254,747 or 32% due to the prior year disposal of capital
assets such as building, roadway pavement, and major park facility in the amount of $ 1,471,025
compared to the current year disposal of land, roadway pavement, sidewalk curb & gutter, hardscape
and softscape of parks, and major park facilities in the amount of $ 30,783.
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
Management’s Discussion and Analysis
7
• Public safety expenses increased by $ 891,669 or 7% due primarily to a 3% cost of living adjustment
( COLA) and 9.3% public employee retirement system ( PERS) employer contribution rate increase.
• Public works expenses increased by $ 2,240,889 or 57% due to a $ 2,200,000 bond call on Special
Assessment Bond Metro 86- 1.
• Community development increased by $ 289,686 or 4% due to a $ 233,659 housing project grant
provided to the Marlin Cove developer.
• Parks and recreation increased by $ 100,532 or 2% reflecting a 3% COLA increase.
• Interest on long- term debt decreased by $ 492,902 or 20% due to scheduled lower interest payments on
general obligation bonds.
Analysis of Change in Net Assets – The City/ District’s net assets decreased by $ 1,579,266 during the
current fiscal year.
Governmental Activities – Governmental activities decreased the City/ District’s net assets by
$ 2,027,311.
Business- type activities - Business- type activities increased the City/ District’s net assets by $ 448,045.
FINANCIAL ANALYSIS OF THE CITY/ DISTRICT’S FUNDS
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related
legal requirements.
Governmental funds. The focus of the City/ District’s governmental funds is to provide information on
near- term inflows, outflows and balances of resources that are available for spending. Such information
is useful in assessing the City/ District’s financial requirements. In particular, unreserved fund balance
may serve as a useful measure of a government’s net resources available for spending at the end of the
fiscal year. Types of governmental funds reported by the City/ District include the General Fund, Special
Revenue Funds, Debt Service Funds, Capital Project Funds, and the Permanent Fund.
As of the end of the current fiscal year, the City/ District’s governmental funds reported combined fund
balances of $ 49,077,804. $ 17,438,391 of this total amount constitutes unreserved fund balance, which is
available for spending at the City/ District’s discretion. The remainder of fund balance is reserved to
indicate that it is not available for new spending because: 1) $ 13,334,107 reflects fund equity in assets
that are long- term in nature and, thus, do not represent available spendable resources; 2) $ 10,499,218 is
restricted for debt service; 3) $ 7,758,088 is restricted for the Agency’s housing programs; and 4) $ 48,000
represents a trust for model home maintenance.
For fiscal year ended June 30, 2004, revenues for governmental functions overall totaled $ 37,626,885,
while expenditures totaled $ 52,888,964. Consequently, expenditures from governmental functions
exceeded revenues by $ 15,262,079.
The General Fund is the chief operating fund of the City/ District. At the end of the current fiscal year, the
unreserved fund balance of the General Fund was $ 18,887,235 while total fund balance was $ 32,221,342.
As a measure of the General Fund’s liquidity, it may be useful to compare both unreserved fund balance
and total fund balance to total fund expenditures. Unreserved fund balance represents 79% of total
General Fund expenditures of $ 23,948,950, while total fund balance represents 135% of that same
amount.
The fund balance in the General Fund decreased by $ 1,580,224 during the fiscal year mainly due to the
revenue decline in sales tax, transient occupancy tax, recreation and leisure programs, and investment and
rental whose growth were affected due to the slow down in the economy. In addition, General Fund
expenses grew by 1% due to the increase of administrative cost of the City/ District’s operating
departments.
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
Management’s Discussion and Analysis
8
The following table provides an explanation of revenues by source that changed significantly over the
prior year.
Revenues Classified by Source
Governmental Funds
Percent Percent Percent
Revenues by Source Amount of Total Amount of Total Amount of Change
Taxes $ 27,150,404 72.16% $ 30,188,837 70.18% $ ( 3,038,433) - 10.06%
Licenses and permits 845,900 2.25% 881,315 2.05% ( 35,415) - 4.02%
Fines and penalties 238,786 0.63% 185,977 0.43% 52,809 28.40%
Investment income and rentals 2,942,074 7.82% 3,157,650 7.34% ( 215,576) - 6.83%
Revenue from other agencies 2,707,833 7.20% 4,101,504 9.53% ( 1,393,671) - 33.98%
Current service charges 1,164,994 3.10% 1,202,629 2.80% ( 37,635) - 3.13%
Special assessment revenue 1,229,743 3.27% 1,882,383 4.38% ( 652,640) - 34.67%
Other 1,347,151 3.58% 1,415,975 3.29% ( 68,824) - 4.86%
Total $ 37,626,885 100.00% $ 43,016,270 100.00% $ ( 5,389,385) - 12.53%
FY 2003/ 2004 FY 2002/ 2003 Increase/( Decrease)
• Taxes decreased by $ 3,038,433 or 10% due to reduced property tax assessments required for debt
service related to the scheduled paydown of the District’s general obligation bonds.
• Licenses and permits decreased by $ 35,415 or 4% due to less permits processed for planning,
architectural review, inspection, and microfilm processing fees.
• Fines and penalties increased by $ 52,809 or 28% due to more citations issued during the year.
• Investment income and rentals decreased by $ 215,576 or 7% as market interest rates continue to
decline and reduction in cash position due to the funding requirements of the government center
project.
• Revenue from other agencies decreased by $ 1,393,671 or 34% due primarily to a $ 1,176,000
project grant received in the prior year.
• Current service charges decreased by $ 37,635 or 3% due to less permits processed during the
year.
• Special assessment revenue decreased by $ 652,640 or 35% as less assessment would be required
to pay for the principal and interest for the Vintage Park assessment bonds.
• Other revenue decreased by $ 68,824 or 5% due to one- time reimbursement from ABAG.
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
Management’s Discussion and Analysis
9
The following table provides an explanation of expenditures by function that changed significantly over
the prior year
Expenditures by Function
Governmental Funds
Percent Percent Percent
Expenditures by Function Amount of Total Amount of Total Amount of Change
General government $ 2,011,884 3.80% $ 2,386,220 4.37% $ ( 374,336) - 15.69%
Public safety 13,907,937 26.30% 12,978,433 23.75% 9 29,504 7.16%
Public works 2,699,440 5.10% 2,163,972 3.96% 5 35,468 24.74%
Community development 6,463,104 12.22% 6,336,193 11.59% 1 26,911 2.00%
Parks and recreation 5,330,070 10.08% 5,380,143 9.84% ( 50,073) - 0.93%
Capital outlay 5,131,537 9.70% 12,898,471 23.60% ( 7,766,934) - 60.22%
Debt service 15,940,336 30.14% 11,023,723 20.17% 4 ,916,613 44.60%
Interest on interfund loans 1,404,656 2.66% 1,487,505 2.72% ( 82,849) - 5.57%
Total $ 52,888,964 100.00% $ 54,654,660 100.00% $ ( 1,765,696) - 3.23%
FY 2003/ 2004 FY 2002/ 2003 Increase/( Decrease)
• General government expenditures decreased by $ 374,336 or 16% due to reallocation of salaries
and benefits to water and sewer funds.
• Public safety expenditures increased by $ 929,504 or 7% due to 3% cost of living adjustment
( COLA) and 9.3% public employee retirement system ( PERS) employer contribution rate
increase.
• Public works expenditures increased by $ 535,468 or 25% due primarily to the completion of the
government center project expenditures that were charged to the department.
• Community development expenditures increased by $ 126,911 or 2% due to a housing project
grant in the amount of $ 109,794 provided to the Marlin Cove developer.
• Parks and recreation expenditures decreased by $ 50,073 or 1% due to a decrease in building
maintenance costs.
• Capital outlay decreased by $ 7,766,934 or 60% due to the completion of government center
project in the fall of 2003.
• Debt service increased by $ 4,916,613 or 45% due to balloon payment made on land reclamation
bonds.
• Interest on interfund loans decreased by $ 82,849 or 6% reflecting the decline in outstanding
advance balance.
Proprietary funds - The City’s proprietary funds provide the same type of information found in the
government- wide financial statements, but in more detail.
At the end of the fiscal year, the unrestricted net assets for the water operation were $ 14,780,343 the
sewer operation $ 32,567,690, and the public transportation $ 35,505.
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
Management’s Discussion and Analysis
10
The total increase in net assets for proprietary funds was $ 461,836. Factors concerning the increase in net
assets are as follows:
• The water fund had an operating loss of $ 385,816 due primarily to a decrease of rental income.
The water fund only received rental income of $ 328,020 in current year compared to $ 902,055 in
prior year from Applied Biosystems for a building lease on 3420 East Third Avenue. The lease
terminated October 31, 2003.
• The sewer fund had operating income of $ 495,698 due primarily to a 10% rate increase effective
on July 1, 2003.
GENERAL FUND BUDGETARY HIGHLIGHTS
A budget amendment was made to the originally budgeted revenues to account for an increase of $ 19,500
that was received from PenTV for running their programs. Amendment was made to the budgeted
expenditures in the amount of $ 571,832 due primarily to the carryover funds from prior year budget and
Shuttle program subsidy.
During the year, actual revenues and transfers in were higher than the budgetary estimates by $ 1,855,631.
Of the net positive variance in revenues, $ 125,214 attributable to property tax, $ 225,247 to sales tax; and
$ 218,809 to permits and $ 1,300,299 to investment and rental income. Franchise fees, real property
transfer tax, reimbursements and grants, and service fees also perform well. Actual expenditures and
transfers out were $ 2,772,376 less than budget due to budgetary savings.
CAPITAL ASSETS
The City/ District’s investment in capital assets for its governmental and business- type activities as of
June 30, 2004, amounted to $ 151,406,807 ( net of accumulated depreciation). This investment in capital
assets includes land, infrastructure, structures and improvements, equipment, and construction in
progress.
Capital assets for the governmental and business- type activities are presented below to illustrate changes
from the prior year:
Capital Assets
( Net of Depreciation)
Total
2004 2003 2004 2003 2004 2003
Land $ 9,862,772 $ 9,889,396 $ - $ - $ 9,862,772 $ 9,889,396
Infrastructure, structures
and improvements 95,906,416 63,582,707 31,933,190 33,030,984 127,839,606 96,613,691
Equipment and
Vehicles 4,983,064 3,199,234 255,558 287,448 5,238,622 3,486,682
Construction in progress 7,484,197 40,035,472 981,610 712,665 8,465,807 40,748,137
Total $ 118,236,449 $ 116,706,809 $ 33,170,358 $ 34,031,097 $ 151,406,807 $ 150,737,906
Governmental Activities Business- type Activities
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
Management’s Discussion and Analysis
11
Major capital asset events during the current fiscal year included the following:
• For governmental activities, construction in progress decreased by $ 32,551,275 due mainly to the
completion and transfer of the Government Center improvement.
• For business- type activities, construction in progress increased by $ 268,945 due mainly to the fourth
water tank project.
Additional information about the City/ District’s capital assets including construction commitments can be
found in Note 6 to the basic financial statements.
DEBT ADMINISTRATION
At June 30, 2004, the City/ District had total long- term obligations outstanding in the amount of
$ 39,403,672, which was comprised of general obligation bonds ($ 4,941,000), tax allocation refunding
bonds ($ 19,285,000), special assessment bonds ($ 5,505,000), Costco notes ($ 1,521,381), tax allocation
bonds ($ 4,145,000), claims liability ($ 17,300)), sewer revenue bonds ($ 1,528,000) and compensated
absences ($ 2,406,991).
The City/ District did not issue any new bonds issue during fiscal year 2003- 2004. The only financial
activities during the fiscal year were scheduled principal and interest payments according to the debt
service schedules. The City/ District retired $ 13,780,231 of debt principal in fiscal year 2003- 2004.
Additional information about the City’s long- term liabilities can be found in Note 7 to the basic financial
statements.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES
• Unemployment rates for San Mateo County down from 5.5% in June 2003 to 4.1% in June 2004.
• Continued significant increase of 33% workers compensation rates.
• Sales tax revenue declined by $ 140,299 or 4% due to continuing reduction in consumer
confidence caused by the slow economy.
• Significant increase in Public Employee Retirement System contribution rates for public safety
from 16.33% to 27.11%.
• State “ take away” revenues from the City/ District in the amount of $ 2,144,223 in fiscal year
2004- 2005. Those revenues are: vehicle license fee ($ 275,321) and District educational revenue
augmentation fund ($ 931,353) and redevelopment agency educational revenue augmentation fund
($ 937,549).
All of these factors were considered in the City/ District’s budget for fiscal year 2004- 2005.
REQUEST FOR INFORMATION
This financial report is designed to provide our citizens, taxpayers, customers and investors and creditors
with a general overview of the City’s finances. Questions concerning any of the information provided in
this report or requests for additional financial information should be addressed to the Finance Director,
610 Foster City Boulevard, Foster City, CA 94404.
12
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BASIC FINANCIAL
STATEMENTS
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
Statement of Net Assets
Governmental Business- Type
Activities Activities Total
ASSETS
Cash and investments $ 51,265,542 $ 31,064,561 $ 82,330,103
Receivables ( net) 1 ,962,877 2,042,612 4,005,489
Internal balances 2 7,594 ( 27,594) -
Inventory 1 1,223 307,423 318,646
Prepaids and deposits 5 ,844 8,127 13,971
Restricted cash and investments 1 0,985,515 954,328 11,939,843
Loans receivable 4 09,323 - 409,323
Special assessment receivable 5 ,507,339 - 5,507,339
Sewer capacity rights - 15,640,742 15,640,742
Capital assets:
Nondepreciable 1 7,346,969 981,610 18,328,579
Depreciable, net of accumulated depreciation 1 00,889,480 32,188,748 133,078,228
Total assets 1 88,411,706 83,160,557 271,572,263
LIABILITIES
Accounts payable 1 ,580,330 1,395,279 2,975,609
Accrued payroll 8 67,773 68,023 935,796
Interest payable 7 16,153 44,223 760,376
Refundable deposits 2 82,120 40,171 322,291
Deferred revenue 1 86,612 - 186,612
Long- term liabilities:
Due within one year 6 ,637,256 408,032 7,045,288
Due in more than one year 3 1,052,185 1,306,199 32,358,384
Total liabilities 4 1,322,429 3,261,927 44,584,356
NET ASSETS
Invested in capital assets, net of related debt 8 9,440,178 31,588,358 121,028,536
Restricted for:
Debt service 1 5,290,404 954,328 16,244,732
June 30, 2004
13
Operating Capital
Charges for Grants and Grants and
Expenses Services Contributions Contributions
FUNCTION/ PROGRAM ACTIVITIES:
Governmental activities:
General government $ 2,705,217 $ 1,242,574 $ 44,000 $ 6,000
Public safety 14,016,691 408,742 199,301 -
Public works 6,192,009 398,625 948,057 740,541
Community development 6,734,993 197,053 - -
Parks and recreation 5,967,687 1,043,428 - -
Interest on long- term liabilities * 2,003,449 - - -
Total governmental activities 37,620,046 3,290,422 1,191,358 746,541
Business- type activities:
Water 6,484,751 6,095,677 - 11,522
Sewer 4 ,640,074 5,036,794 - -
Public transportation 211,109 206,231 - -
Total business- type activities 11,335,934 11,338,702 - 11,522
Total $ 48,955,980 $ 14,629,124 $ 1,191,358 $ 758,063
GENERAL REVENUES:
Taxes:
Property taxes
Transient occupancy tax
Franchise tax
Other taxes
Contributions not restricted to specific programs:
Sales taxes
Motor vehicle in lieu fees
Unrestricted investment and rental income
Other
TRANSFERS
Total general revenues and transfers
Change in net assets
NET ASSETS, BEGINNING OF YEAR
NET ASSETS, END OF YEAR
* This amount excludes $ 281,288 of interest expense that is included as direct expenses of the community development
program.
See accompanying notes to the basic financial statements.
Program Revenues
For the Fiscal Year Ended June 30, 2004
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
Statement of Activities
14
Business-
Governmental type
Activities Activities Total
$ ( 1,412,643) $ - $ ( 1,412,643)
( 13,408,648) - ( 13,408,648)
( 4,104,786) - ( 4,104,786)
( 6,537,940) - ( 6,537,940)
( 4,924,259) - ( 4,924,259)
( 2,003,449) - ( 2,003,449)
( 32,391,725) - ( 32,391,725)
- ( 377,552) ( 377,552)
- 396,720 396,720
- ( 4,878) ( 4,878)
- 14,290 1 4,290
( 32,391,725) 14,290 ( 32,377,435)
21,258,698 1,942 21,260,640
845,772 - 845,772
838,572 - 838,572
1,027,804 - 1,027,804
3,527,247 - 3,527,247
1,607,385 - 1,607,385
603,723 609,432 1,213,155
477,594 - 477,594
177,619 ( 177,619) -
30,364,414 433,755 30,798,169
( 2,027,311) 448,045 ( 1,579,266)
149,116,588 79,450,585 228,567,173
$ 147,089,277 $ 79,898,630 $ 226,987,907
Net ( Expenses) Revenues and
Changes in Net Assets
15
Metro Center Tax
Special Allocation
Assessment Refunding City Capital
General Bonds Bonds Projects
ASSETS:
Cash and investments $ 18,201,375 $ - $ - $ 8 ,719,271
Receivables, net of allowance:
Accrued interest 461,678 - 24,371 -
Taxes 875,974 - - -
Intergovernmental 357,490 - - -
Other 105,897 - - -
Due from other funds 913,776 - - -
Prepaids and deposits 5,844 - - -
Restricted cash and investments 23,068 1,472,668 5,961,992 7 5,121
Loans receivable, net of allowance - - - -
Special assessments receivable 2,339 3,405,000 - -
Advances to other funds 13,334,107 - - -
Total assets $ 34,281,548 $ 4,877,668 $ 5,986,363 $ 8 ,794,392
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable $ 660,420 $ - $ - $ 1 56,431
Accrued payroll 818,782 - - -
Due to other funds - - - -
Refundable deposits 118,682 - - 7 5,121
Deferred revenue 462,322 3,405,000 - 1 ,950
Advances from other funds - - - -
Total liabilities 2,060,206 3,405,000 - 2 33,502
Fund balances:
Reserved for:
Advances to other funds 13,334,107 - - -
Debt service - 1,472,668 5,986,363 -
Green area maintenance - - - -
Housing programs - - - -
Unreserved, reported in:
General fund 18,887,235 - - -
Special revenue funds - - - -
Capital projects funds - - - 8 ,560,890
Total fund balances 32,221,342 1,472,668 5,986,363 8 ,560,890
June 30, 2004
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
Balance Sheet
Governmental Funds
16
Community
Development Other
Agency Funds Total
$ 9,956,831 $ 2,249,248 $ 39,126,725
- - 486,049
- 31,901 907,875
- 94,962 452,452
- 8,000 113,897
- - 913,776
- - 5,844
364,517 3,088,149 10,985,515
409,323 - 409,323
- 2,100,000 5,507,339
- - 13,334,107
$ 10,730,671 $ 7,572,260 $ 72,242,902
$ 616,165 $ 695 $ 1,433,711
150 3,857 822,789
894,405 19,371 913,776
88,317 - 282,120
409,323 2,100,000 6,378,595
13,334,107 - 13,334,107
15,342,467 2,123,923 23,165,098
- - 13,334,107
- 3,040,187 10,499,218
- 48,000 48,000
7,758,088 - 7,758,088
- - 18,887,235
- 2,360,150 2,360,150
( 12,369,884) - ( 3,808,994)
( 4,611,796) 5,448,337 49,077,804
17
18
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CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
Reconciliation of the Balance Sheet to
Statement of Net Assets - Governmental Activites
June 30, 2004
Fund balances - total governmental funds ( page 17) $ 49,077,804
Amounts reported for governmental activities in the
statement of net assets are different because:
Capital assets used in governmental activities are not financial resources
and therefore are not reported in the governmental funds. 112,403,014
Loan receivables and other long- term receivables are not
available to pay current- period expenditures and,
therefore, are deferred in the governmental funds. 684,644
Special assessments are reported as revenue when levied in government- wide
financial statements. In governmental funds, these assessments are reported as
deferred revenue ( a liability) since they are not available to pay current
period expenditures. 5,507,339
Internal service funds are used by management to charge the costs of
management of vehicles, equipment, self insurance, communication
and information services and building maintenane to individual funds.
The assets and liabilities are included in governmental activities in the
statement of net assets. 17,683,180
Long- term liabilities and accrued interest payable are not due and payable
in the current period and therefore are not reported in the governmental
funds.
General obligation bonds ( 4,941,000)
Tax allocation refunding bonds ( 19,285,000)
Special assessment bonds ( 5 505 000)
19
Metro Center Tax
Special Allocation
General Assessment Refunding
Fund Bonds Bonds
REVENUES:
Property taxes $ 8,811,214 $ - $ 6,978,951
Sales and use taxes 3,527,247 - -
Transient occupancy tax 845,772 - -
Franchise tax 838,572 - -
Motor vehicle in lieu fees 1,332,064 - -
Other taxes 311,516 - -
Licenses and permits 845,900 - -
Intergovernmental 374,429 - -
Charges for current services 1,164,994 - -
Fines and forfeitures 55,176 - -
Special assessments - 866,083 -
Investment income and rentals 2,677,219 15,678 ( 24,808)
Other 669,921 - 2,995
Total revenues 21,454,024 881,761 6,957,138
EXPENDITURES:
Current:
General government 2,002,203 - -
Public safety 13,795,777 - -
Public works 1 ,923,941 - -
Community development 866,968 - -
Parks and recreation 5,330,070 - -
Capital outlay 29,991 - -
Debt service:
Principal repayment - 3,615,000 2,775,000
Interest and fiscal charges - 600,418 895,325
Interest on interfund loans from other funds - - -
Total expenditures 23,948,950 4,215,418 3,670,325
Excess ( deficiency) of revenues
over ( under) expenditures ( 2,494,926) ( 3,333,657) 3,286,813
Other financing sources ( uses):
Transfers in 1,043,991 - -
Transfers out ( 129,289) - ( 3,264,950)
Total other financing sources and uses 914,702 - ( 3,264,950)
Net change in fund balances ( 1,580,224) ( 3,333,657) 21,863
Fund balances, beginning of year 33,801,566 4,806,325 5,964,500
Fund balances, end of year $ 32,221,342 $ 1,472,668 $ 5,986,363
See accompanying notes to the basic financial statements.
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds
For the Fiscal Year Ended June 30, 2004
20
Community
City Capital Development Other
Projects Agency Funds Total
$ - $ 3,502,515 $ 1 ,966,018 $ 2 1,258,698
- - 3 68,599 3 ,895,846
- - - 8 45,772
- - - 8 38,572
- - - 1 ,332,064
- - - 3 11,516
- - - 8 45,900
255,000 - 7 46,340 1 ,375,769
- - - 1 ,164,994
- - 1 83,610 2 38,786
- - 3 63,660 1 ,229,743
58,606 184,773 3 0,606 2 ,942,074
485,541 188,694 - 1 ,347,151
799,147 3,875,982 3 ,658,833 3 7,626,885
- - 9 ,681 2 ,011,884
- - 1 12,160 1 3,907,937
541,537 - 2 33,962 2 ,699,440
- 5,596,137 - 6 ,463,105
- - - 5 ,330,070
3,616,278 454,532 1 ,030,736 5 ,131,537
- - 6 ,965,000 1 3,355,000
- 134,210 9 55,383 2 ,585,336
- 1,404,655 - 1 ,404,655
4,157,815 7,589,534 9 ,306,922 5 2,888,964
( 3,358,668) ( 3,713,552) ( 5,648,089) ( 15,262,079)
129,289 3,264,950 5 12,640 4 ,950,870
- ( 362,865) ( 1,016,147) ( 4,773,251)
129,289 2,902,085 ( 503,507) 1 77,619
( 3,229,379) ( 811,467) ( 6,151,596) ( 15,084,460)
11,790,269 ( 3,800,329) 1 1,599,933 6 4,162,264
$ 8,560,890 $ ( 4,611,796) $ 5 ,448,337 $ 4 9,077,804
21
22
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CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
Reconciliation of the Statement of Revenues, Expenditures and
Changes in Fund Balances of Governmental Funds to
Statement of Activities - Governmental Activities
For the Fiscal Year Ended June 30, 2004
Net change in fund balances - total governmental funds ( page 21) $ ( 15,084,460)
Amounts reported for governmental activities in the
statement of activities are different because:
Governmental funds report capital outlay as expenditures. However, in
the statement of activities, the cost of those assets is allocated over
their estimated useful lives and reported as depreciation expense.
Expenditures for capital assets 5,131,537
Less capital assets transferred to Internal Service Funds ( 2,012,070)
Less loss on abandonment of capital improvement projects and
disposals of capital assets ( 30,783)
Add capital assets transferred from Internal Service Funds 1,836,268
Less current year depreciation ( 3,298,110) 1,626,842
Revenues and loans repayments recognized in the governmental funds that were
earned and recognized in previous years and are reported as beginning net assets
in the statement of activites.
Loan repayments received ( 150,677)
Because special assessment revenues will not be collected for several months
after the City's fiscal year ends, they are not considered " available" revenue and
are deferred in the governmental funds. Deferred revenues decreased by this
amount this year. ( 2,675,287)
Because other revenues will not be collected for several months after the City's
fiscal year ends, they are not considered " available" revenue and are deferred
in the governmental funds. Other deferred revenues increased by this
amount this year. 275,321
Repayment of bond and long- term note principal is an expenditure in the
governmental funds, but the repayment reduces long- term liabilities in
the statement of net assets.
General obligation bonds 6,560,000
Tax allocation refunding bonds 2,775,000
Special assessment bonds 3,885,000
Tax allocation bonds 135,000 13,355,000
S t d i th t t t f ti iti d t i th
23
24
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CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
Statement of Fund Net Assets
Proprietary Funds
Nonmajor - Internal
Public Service
Water Sewer Transportation Total Funds
ASSETS:
Current assets:
Cash and investments $ 1 4,503,073 $ 16,561,488 $ - $ 31,064,561 $ 1 2,138,817
Receivables:
Billed utility 4 76,407 396,096 - 872,503 -
Unbilled utility 6 76,037 463,594 - 1,139,631 -
Other - - 30,478 30,478 2 ,604
Inventory 1 65,320 142,103 - 307,423 1 1,223
Prepaids and deposits - - 8,127 8,127 -
Total current assets 1 5,820,837 17,563,281 38,605 33,422,723 1 2,152,644
Noncurrent assets:
Restricted cash and investments - 954,328 - 954,328 -
Sewer capacity rights - 15,640,742 - 15,640,742 -
Capital assets:
Nondepreciable 7 79,776 201,834 - 981,610 8 50,374
Depreciable, net of accumulated depreciation 2 1,251,010 10,937,738 - 32,188,748 4 ,983,061
Total noncurrent assets 2 2,030,786 27,734,642 - 49,765,428 5 ,833,435
Total assets 3 7,851,623 45,297,923 38,605 83,188,151 1 7,986,079
LIABILITIES:
Current liabilities:
Accounts payable 9 06,844 485,335 3,100 1,395,279 1 46,619
Accrued payroll 2 4,405 43,618 - 68,023 4 4,985
Interest payable - 44,223 - 44,223 -
Refundable deposits 4 0,171 - - 40,171 -
Compensated absences 3 2,947 35,085 - 68,032 5 5,149
Revenue bonds payable - current portion - 340,000 - 340,000 -
Total current liabilities 1 ,004,367 948,261 3,100 1,955,728 2 46,753
Noncurrent liabilities:
Claims liability - - - - 1 7,300
Compensated absences 3 6,127 28,072 - 64,199 6 6,440
Revenue bonds payable - 1,242,000 - 1,242,000 -
Total noncurrent liabilities 3 6,127 1,270,072 - 1,306,199 8 3,740
Total liabilities 1 ,040,494 2,218,333 3,100 3,261,927 3 30,493
NET ASSETS:
Invested in capital assets,
June 30, 2004
Enterprise Funds
25
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
Statement of Revenues, Expenses and Changes in Fund Net Assets
Proprietary Funds
Nonmajor- Internal
Public Service
Water Sewer Transportation Total Funds
OPERATING REVENUES:
Sales and service charges $ 6 ,093,718 $ 4,953,264 $ 206,231 $ 1 1,253,213 $ -
Connection fees 5 50 - - 5 50 -
Charges for services - internal - - - - 3,742,495
Other 1 ,409 83,530 - 8 4,939 -
Total operating revenues 6 ,095,677 5,036,794 206,231 1 1,338,702 3,742,495
OPERATING EXPENSES:
Personnel 6 21,494 915,005 - 1 ,536,499 1,130,593
Utilities 3 ,204,446 213,819 - 3 ,418,265 -
Program supplies 4 35,669 432,980 2,406 8 71,055 -
Repairs and maintenance 2 2,161 50,514 - 7 2,675 1,354,129
General and administrative 9 72,597 827,000 - 1 ,799,597 -
Depreciation and amortization 1 ,070,212 855,087 - 1 ,925,299 937,460
Contractual services 1 49,914 1,241,691 208,703 1 ,600,308 247,445
Insurance 5 ,000 5,000 - 1 0,000 206,243
Total operating expenses 6 ,481,493 4,541,096 211,109 1 1,233,698 3,875,870
Operating income ( loss) ( 385,816) 495,698 ( 4,878) 1 05,004 ( 133,375)
NONOPERATING REVENUES ( EXPENSES):
Property taxes - 1,942 - 1 ,942 -
Gain on sale of capital assets - - - - 34,790
Loss on disposal of capital assets - - - - ( 19,030)
Investment income 1 34,043 147,369 - 2 81,412 109,703
Rental income 3 28,020 - - 3 28,020 -
Interest expense - ( 88,445) - ( 88,445) -
Total nonoperating revenues ( expenses) 4 62,063 60,866 - 5 22,929 125,463
Income before contributions
and transfers 7 6,247 556,564 ( 4,878) 6 27,933 ( 7,912)
Capital contributions 1 1,522 - - 1 1,522 6,000
Transfers in - - - - 2,103,698
Transfers out - - ( 177,619) ( 177,619) ( 1,927,896)
Ch i 87 769 556 564 ( 182 497) 4 61 836 173 890
For the Year Ended June 30, 2004
Enterprise Funds
26
Nonmajor- Internal
Public Service
Water Sewer Transportation Total Funds
Cash flows from operating activities:
Cash received from customers/ other funds $ 5,870,780 $ 4,981,542 $ 265,251 $ 11,117,573 $ 3,740,991
Cash payment to suppliers for goods and services ( 4,506,582) ( 2,413,256) ( 201,029) ( 7,120,867) ( 2,028,138)
Cash payment to employees for services ( 635,902) ( 927,005) - ( 1,562,907) ( 1,119,360)
Net cash provided by operating activities 728,296 1,641,281 64,222 2,433,799 5 93,493
Cash flows from noncapital financing activities:
Transfers received - - - - 9 1,628
Transfers paid - - ( 177,619) ( 177,619) ( 91,628)
Property tax receipts - 1,942 - 1 ,942 -
Net cash provided by ( used in)
noncapital financing activities - 1,942 ( 177,619) ( 175,677) -
Cash flows from capital and related financing activities:
Proceeds from sale of capital assets - - - - 3 4,790
Acquisition and construction of capital assets ( 579,750) ( 174,005) - ( 753,755) ( 683,486)
Capital contributions from developers 11,522 - - 1 1,522 6,000
Acquisition of sewer capacity rights - ( 162,118) - ( 162,118) -
Principal paid on bonds - ( 277,000) - ( 277,000) -
Interest paid on bonds - ( 96,780) - ( 96,780) -
Net cash used in capital and related financing activities ( 568,228) ( 709,903) - ( 1,278,131) ( 642,696)
Cash flows from investing activities:
Interest received on investments 134,043 1 47,369 - 2 81,412 109,703
Rent received on property 328,020 - - 3 28,020 -
Net cash provided by investing activities 462,063 1 47,369 - 6 09,432 109,703
Net change in cash and cash equivalents 622,131 1,080,689 ( 113,397) 1,589,423 6 0,500
Cash and cash equivalents, beginning of year 13,880,942 1 6,435,127 113,397 3 0,429,466 12,078,317
Cash and cash equivalents, end of year $ 14,503,073 $ 17,515,816 $ - $ 3 2,018,889 $ 12,138,817
Reconciliation of operating income to net cash
provided by operating activities:
Operating income ( loss) $ ( 385,816) $ 495,698 $ ( 4,878) $ 105,004 $ ( 133,375)
Adjustments to reconcile operating income
to net cash provided by operating activities:
Depreciation and amortization 1,070,212 8 55,087 - 1 ,925,299 9 37,460
Changes in operating assets and liabilities:
Decrease ( increase) in:
Billed receivables ( 83,985) 379 - ( 83,606) -
Unbilled receivables ( 102,492) ( 56,693) - ( 159,185) -
Other receivables 800 1,062 59,020 60,882 ( 1,504)
Inventory 50,321 ( 15,438) - 3 4,883 7,251
Prepaids and deposits - - 8 ,718 8,718 -
Increase ( decrease) in:
Accounts payable and claims liability 232,884 3 73,186 1 ,362 607,432 ( 227,572)
Accrued payroll 748 7,972 - 8 ,720 117
Compensated absences ( 15,156) ( 19,972) - ( 35,128) 1 1,116
Refundable deposits ( 39,220) - - ( 39,220) -
Net cash provided by operating activities $ 7 28,296 $ 1,641,281 $ 6 4,222 $ 2,433,799 $ 593,493
Noncash capital and related financing transactions:
Disposal of contributed capital assets $ - $ - $ - $ - $ ( 19,030)
Capital assets contributed from ( to) other funds - - - - 175,802
Total noncash capital and related financing transactions $ - $ - $ - $ - $ 156,772
For the Fiscal Year Ended June 30, 2004
See accompanying notes to the basic financial statements.
Enterprise Funds
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IMPROVEMENT DISTRICT
Statement of Cash Flows
Proprietary Funds
27
28
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NOTES TO
BASIC FINANCIAL
STATEMENTS
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IM PROVEMENT DISTRICT
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2004
29
NOTE 1 - DESCRIPTION OF REPORTING ENTITY
The Estero Municipal Improvement District ( District) was created by the California Legislature in 1960 to
issue general obligation bonds to fill and reclaim the land that became the City of Foster City ( City) upon
the City’s incorporation in 1971. The City is a general law city and operates under a Council- Manager
form of government, providing such services as public safety ( police, fire and building inspection),
highways and streets, sewer, water, parks and recreation, public improvements, planning and zoning and
general administrative services. The District, although a separate entity, encompasses the same basic
geographical area, is inhabited by the same citizens and is governed, administered and budgeted by the
same governmental body and procedures as the City and is included with the operations of the City in the
accompanying financial statements.
As required by accounting principles generally accepted in the United States of America ( GAAP), these
financial statements present the City and District ( Primary Government) and the City of Foster City
Community Development Agency ( Agency) and the Foster City Public Financing Authority ( Authority)
as its component units. The Agency and the Authority, although legally separate entities, are in
substance, part of the City/ District’s operations. The City Council and the District Board of Directors
also serve on the boards of the Agency and the Authority. The Agency and the Authority are blended into
the operations of the City/ District in the accompanying financial statements.
Blended Component Units
The Agency functions as an independent entity, but its policies are determined by the City Council and
District Board of Directors of the City/ District acting in a separate capacity as board members of the
Agency pursuant to Section 33000 of the Community Redevelopment Law. The Agency is broadly
empowered to engage in the general economic revitalization and redevelopment of the City through
acquisition and development of property in those areas of the City determined to be in a declining
condition or in need of development.
The Authority is a joint powers authority, organized pursuant to a Joint Exercise of Powers Agreement
between the City and the Agency. The Authority functions as an independent entity and its policies are
determined by the City Council and District Board of Directors of the City/ District acting in a separate
capacity as board members of the Authority pursuant to Section 6500 of the Government Code of the
State of California. The Authority is a separate entity constituting a public instrumentality of the State
and was formed for the public purpose of assisting the City and the Agency in financing capital projects.
The Authority did not have any financial balances or activity as of and for the fiscal year ended June 30,
2004.
Complete financial statements for the Agency may be obtained through the City/ District’s Financial
Services Department, 610 Foster City Boulevard, Foster City, California, 94404.
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IM PROVEMENT DISTRICT
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2004
30
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
( a) Basis of Presentation
Government- wide Financial Statements
The statement of net assets and statement of activities display information about the primary government
( City/ District) and its component units. These statements include the financial activities of the overall
government. Eliminations have been made to minimize the double counting of internal activities. These
statements distinguish between the governmental and business- type activities of the City/ District.
Governmental activities, which normally are supported by taxes, intergovernmental revenues and other
nonexchange transactions, are reported separately from business- type activities, which rely to a
significant extent on fees charged to external parties.
The statement of activities presents a comparison between direct expenses and program revenues for each
segment of the business- type activities of the City/ District and for each function of the City/ District’s
governmental activities. Direct expenses are those that are specifically associated with a program or
function and; therefore, are clearly identifiable to a particular function. Program revenues include 1) fees,
fines and charges paid by the recipients of goods or services offered by the programs and 2) grants and
contributions that are restricted to meeting the operational or capital requirements of a particular program.
Revenues that are not classified as program revenues, including all taxes, are presented instead as general
revenues.
Fund Financial Statements
The fund financial statements provide information about the City/ District’s funds. Separate statements for
each fund category – governmental and proprietary – are presented. The emphasis of fund financial
statements is on major governmental and enterprise funds, each displayed in a separate column. All
remaining governmental and enterprise funds are separately aggregated and reported as nonmajor funds.
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating
revenues and expenses generally result from providing services in connection with the fund’s principal
ongoing operations. The principal operating revenues of the City/ District’s enterprise and internal service
funds are charges for customer services including: water and sewer charges; public transportation fares;
vehicle, equipment and building maintenance and usage fees; insurance charges and information services
support charges. Operating expenses for enterprise funds and internal service funds include the cost of
services, administrative expenses and depreciation on capital assets. All revenues and expenses not
meeting this definition are reported as nonoperating revenues and expenses.
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IM PROVEMENT DISTRICT
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2004
31
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( Continued)
The City/ District reports the following major governmental funds:
The General Fund is used to account for all revenues and expenditures necessary to carry out basic
governmental activities of the City/ District that are not accounted for through other funds.
The Metro Center Special Assessment Bonds accounts for accumulation of special assessments for
payment of principal and interest on special assessment bonds of 1985, 1986 and 1989 for the
development of the Metro Center.
The Tax Allocation Refunding Bonds accounts for the payment of principal and interest on the 2001 tax
allocation refunding bonds that refunded the 1993 and 1996 revenue bonds.
The City Capital Projects Fund accounts for development, construction or acquisition of approved capital
projects funded by certain general obligation bonds and capital grants.
The Community Development Agency accounts for revenues from the property tax increments raised from
the Agency’s investment in upgrading properties for further development.
The City/ District reports the following major enterprise funds:
The Water Fund accounts for activities associated with providing water services including construction of
water plant facilities.
The Sewer Fund accounts for activities associated with sewage transmissions and treatment including
construction of sewer plant facilities and servicing of interest and principal on sewer bonds of 1964, 1972,
1979 and 1993.
In addition, the City/ District reports Internal Service Funds to account for the City/ District’s vehicle
rental, equipment replacement, self- insurance, information technology and building maintenance services
provided to other departments of the City/ District on a cost- reimbursement basis.
( b) Measurement Focus, Basis of Accounting
The government- wide and proprietary fund financial statements are reported using the economic
resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned
and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows
take place. Nonexchange transactions, in which the City/ District gives ( or receives) value without
directly receiving ( or giving) equal value in exchange, include property and sales taxes, grants,
entitlements and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal
year for which the taxes are levied. Revenues from sales tax are recognized when the underlying
transactions take place. Revenues from grants, entitlements and donations are recognized in the fiscal
year in which all eligibility requirements have been satisfied.
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IM PROVEMENT DISTRICT
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2004
32
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( Continued)
Governmental funds are reported using the current financial resources measurement focus and the
modified accrual basis of accounting. Under this method, revenues are recognized when measurable and
available. Property and sales taxes, interest, certain state and federal grants and charges for services are
accrued when their receipt occurs within sixty days after the end of the accounting period so as to be both
measurable and available. Expenditures are generally recorded when a liability is incurred, as under
accrual accounting. However, debt service expenditures as well as expenditures related to compensated
absences are recorded only when payment is due. General capital assets acquisitions are reported as
expenditures in governmental funds. Proceeds of general long- term debt and capital leases are reported as
other financing sources.
Under the terms of grant agreements, the City/ District funds certain programs by a combination of
specific cost- reimbursement grants and general revenues. Thus, when program expenses are incurred,
there are both restricted and unrestricted net assets available to finance the program. It is the
City/ District’s policy to first apply cost- reimbursement grant resources to such programs and then by
general revenue.
Private- sector standards of accounting and financial reporting issued prior to December 1, 1989, generally
are followed in both the government- wide and proprietary fund financial statements to the extent that
those standards do not conflict with or contradict guidance of the Governmental Accounting Standards
Board ( GASB). Governments also have the option of following subsequent private- sector guidance for
their business- type activities and enterprise funds, subject to the same limitation. The City/ District has
elected not to follow subsequent private- sector guidance.
( c) Cash and Cash Equivalents
Proprietary fund types’ cash and investments are deposited in the City/ District’s cash and investment
pool, invested in short- term money market securities or held by financial institutions for debt service
payments. Amounts invested in the City/ District’s cash and investment pool are, in substance, demand
deposits and are, therefore, considered cash equivalents for purposes of the statement of cash flows.
Amounts invested in money market securities and cash held by financial institutions are highly liquid
( including those classified as restricted assets on the statement of fund net assets), generally with original
maturities less than three months, and are, therefore, also considered cash equivalents.
( d) Investments
The City/ District maintains a cash and investment pool that is available for use by all funds. Statutes and
the City/ District’s investment policy authorize the City/ District to invest in the State Local Agency
Investment Fund, the San Mateo County Pool Investment Program, securities of the U. S. and other
government issues, bankers’ acceptances, commercial paper, negotiable certificates of deposit, repurchase
agreements, medium- term corporate notes, mutual funds as permitted by the California Government Code
and nonnegotiable certificates of deposits.
Investments are stated at fair value. The fair value of investments is determined annually and is based on
current market prices. The method of allocating interest earned on pooled deposits and investments
among governmental and proprietary funds is based upon average cash balances and is performed on a
quarterly basis.
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IM PROVEMENT DISTRICT
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2004
33
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( Continued)
( e) Inventory
Inventory, consisting of expendable supplies, is stated at average cost which approximates market value.
The cost of governmental funds inventory is recorded as an expenditure when consumed.
( f) Notes Receivable
For the purposes of the fund financial statements, expenditures related to long- term loans arising from
loan subsidy programs are charged to operations upon funding and the loans are recorded, net of an
estimated allowance for potentially uncollectible loans, with an offset to a deferred revenue account. The
balance of the long- term loans receivable includes loans that may be forgiven if certain terms and
conditions of the loans are met. For purposes of the government- wide financial statements, long- term
loans are not offset by deferred revenue nor is activity reflected in the statement of activities.
( g) S pecial Assessments Receivable
Special assessments receivable reported in the Metro Center Special Assessment Bonds debt service fund
and the nonmajor governmental debt service funds represent future assessments to be received for the
payment of Metro Center and Vintage Park improvement bonds which are considered to be a possible
liability of the City/ District in the case of default. Recognition of the revenues from these assessments
has been deferred until both measurable and available in governmental funds. In the government- wide
financial statements, however, these amounts are reported as revenues in the period they are levied. Once
received, the money will be used to meet the annual debt service requirements on related bonds.
( h) Prepaid Items
Payments made to vendors for services that will benefit periods beyond June 30, 2004, are recorded as
prepaid items, and in governmental fund financial statements are offset equally by a fund balance reserve,
which indicates that they do not constitute expendable available financial resources and therefore are not
available for appropriation.
( i) Restricted Assets
Certain proceeds of the City/ District’s governmental funds long term debt obligations and enterprise fund
revenue bonds, as well as certain resources set aside for their repayment, are classified as restricted assets
on the fund and government- wide statements of net assets because they are maintained in separate fiscal
agent accounts and their use is limited by applicable bond covenants.
( j) Sewer Capacity Rights
The City/ District entered into a Joint Powers Agreement ( JPA) with the City of San Mateo ( City) to
construct sewer facilities ( see Note 11). A portion of the payments made to the City/ District under the
JPA represent reimbursement for capital facilities costs. All capital facilities costs are capitalized in the
Sewer Enterprise Fund and once placed in service, these costs are amortized using the straight- line
method over 50 years.
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IM PROVEMENT DISTRICT
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2004
34
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( Continued)
( k) Capital Assets
Capital assets ( including infrastructure) are recorded at historical cost or at estimated historical cost if
actual historical cost is not available. Contributed capital assets are valued at their estimated fair market
value on the date contributed. Capital assets include public domain ( infrastructure). Infrastructure
consists of improvements including the roadway/ street network; park system; and the storm drain,
sanitary sewer and water distribution systems. The City/ District has a policy whereby assets with an
initial, individual cost of more than $ 5,000 and $ 100,000 for its noninfrastructure and infrastructure
assets, respectively, and an estimated useful life in excess of three years will be capitalized. Capital assets
used in operations are depreciated using the straight- line method over their estimated useful lives in the
government- wide statements and proprietary funds.
The estimated useful lives are as follows:
The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend
asset lives is not capitalized. Improvements are capitalized and, for government- wide statements and
proprietary fund types, are depreciated over the remaining useful lives of the related capital assets.
( l) Compensated Absences ( Vacation and Sick Pay)
The City/ District reports compensated absences for accrued vacation and sick pay. In the event of
termination, employees are paid for all unused vacation at current hourly rate in effect. For management
employees, vacation pay may be accrued up to three years without forfeiture while, for non- management
employees, vacation pay may be accrued up to two years. The vested portion is available for current use
or, if unused, is payable upon termination. After six months of employment, 25% to 50% of an
employee’s accrued sick leave vests at the current rate of pay.
The City/ District accrues for all salary- related items in the government- wide and proprietary fund
financial statements for which they are liable to make a payment directly and incrementally associated
with payments made for compensated absences on termination.
Infrastructure:
Roadway/ street network ( including levee) 10 to 100 years
Park systems 8 to 50 years
Storm drain, sanitary sewer and water distribution systems 12 to 50 years
Buildings and improvements 45 to 50 years
Equipment 3 to 10 years
Vehicles 4 to 25 years
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IM PROVEMENT DISTRICT
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2004
35
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( Continued)
( m) Long- term Obligations
Long- term debt is recognized as a liability in governmental fund financial statements when due or when
resources have been accumulated in the debt service funds for payment early in the following year. For
other governmental fund long- term obligations, only that portion expected to be liquidated with
expendable available financial resources is reported as a fund liability of a governmental fund type to the
extent they are due and payable. The total obligation is reported in the government- wide statement of net
assets. Long- term liabilities expected to be financed from proprietary fund type operations are accounted
for in those funds.
( n) Property Tax Levy, Collection and Maximum Rates
State of California ( State) Constitution Article XIIIA provides that the combined maximum property tax
rate on any given property may not exceed 1% of its assessed value ($ 1.00 per $ 100 of assessed value)
plus an additional amount for general obligation debt approved by voters. Assessed value is calculated at
100% of market value as defined by Article XIIIA and may be adjusted by no more than 2% per year
unless the property is sold or transferred. The state legislature has determined the method of distribution
of receipts from the $ 1.00 tax levy among the counties, cities, school districts and other districts.
The County of San Mateo assesses properties and bills for and collects property taxes as follows:
The term “ unsecured” refers to taxes on personal property other than land and buildings. These
“ unsecured” taxes are secured by liens on the personal property being taxed. San Mateo County
distributes to the City/ District the entire amount of each year’s levy and in return receives all penalties
and interest on delinquent payments.
( o) Revenue Recognition for Water and Sewer Enterprise Funds
Revenue is recorded as billed to customers on a cyclical basis. All customers are billed bi- monthly.
Amounts unbilled at June 30 are accrued and recognized as revenue. At June 30, 2004, the billed and
unbilled receivables are shown net of an allowance for uncollectibles for the Water and the Sewer
Enterprise Funds in the amount of $ 1,459 and $ 2,497, respectively.
Secured Unsecured
Valuation/ lien dates January 1 January 1
Levy dates On or before November 1 July 1
Due dates ( delinquent after) 50% on November 1 ( December 10) July 1 ( August 31)
50% on February 1 ( April 10)
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IM PROVEMENT DISTRICT
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2004
36
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( Continued)
( p) Interfund Transactions
Interfund transactions are reflected as either loans, services provided, reimbursements or transfers. Loans
reported as receivables and payables as appropriate, are subject to elimination upon consolidation in the
government- wide financial statements and are referred to as either “ due to/ from other funds” ( i. e., the
current portion of interfund loans) or “ advances to/ from other funds” ( i. e., the noncurrent portion of
interfund loans). Any residual balances outstanding between the governmental activities and the
business- type activities are reported in the government- wide financial statements as “ internal balances”.
Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve
account in applicable governmental funds to indicate that they are not available for appropriation and are
not available financial resources.
Services provided, deemed to be at market or near market rates, are treated as revenues and
expenditures/ expenses. Reimbursements are when one fund incurs a cost, charges the appropriate
benefiting fund and reduces its related cost as a reimbursement. All other interfund transactions are
treated as transfers. Transfers within governmental or proprietary funds are netted as part of the
reconciliation to the government- wide presentation.
( q) Effects of New Pronouncements
In November 2003, GASB issued Statement No. 42, Accounting and Financial Reporting for Impairment
of Capital Assets and for Insurance Recoveries. This statement 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. This statement is effective for the City/ District’s fiscal
year ending June 30, 2006.
In April 2004, GASB issued Statement No. 43, Financial Reporting for Postemployment Benefit Plans
Other Than Pension Plans. This statement establishes uniform financial reporting standards for other
postemployment benefits ( OPEB) plans. The approach followed in this statement generally is consistent
with the approach adopted for defined benefit pension plans with modifications to reflect differences
between pension plans and OPEB plans. The statement applies for OPEB trust funds included in the
financial reports of plan sponsors or employers, as well as for the stand- alone financial reports of OPEB
plans or the public employee retirement systems, or other third parties, that administer them. This
statement also provides requirements for reporting of OPEB funds by administrators of multiple- employer
OPEB plans, when the fund used to accumulate assets and pay benefits or premiums when due is not a
trust fund. This statement is effective for the City/ District’s fiscal year ending June 30, 2008.
In May 2004, GASB issued Statement No. 44, Economic Condition Reporting: The Statistical Section—
an amendment of NCGA Statement 1. This statement amends the portions of NCGA Statement 1,
Governmental Accounting and Financial Reporting Principles, that guide 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. This statement adds new information that
financial statement users have identified as important and eliminates certain previous requirements. This
statement is effective for the City/ District’s fiscal year ending June 30, 2006.
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IM PROVEMENT DISTRICT
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2004
37
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( Continued)
In June 2004, GASB issued Statement No. 45, Accounting and Financial Reporting by Employers for
Postemployment Benefits Other Than Pensions, which addresses how state and local governments should
account for and report their costs and obligations related to postemployment healthcare and other
nonpension benefits. Collectively, these benefits are commonly referred to as other postemployment
benefits, or OPEB. The statement generally requires that employers account for and report the annual
cost of OPEB and the outstanding obligations and commitments related to OPEB in essentially the same
manner as they currently do for pensions. Annual OPEB cost for most employers will be based on
actuarially determined amounts that, if paid on an ongoing basis, generally would provide sufficient
resources to pay benefits as they come due. This statement’s provisions may be applied prospectively and
do not require governments to fund their OPEB plans. An employer may establish its OPEB liability at
zero as of the beginning of the initial year of implementation; however, the unfunded actuarial liability is
required to be amortized over future periods. This statement also establishes disclosure requirements for
information about the plans in which an employer participates, the funding policy followed, the actuarial
valuation process and assumptions, and, for certain employers, the extent to which the plan has been
funded over time. This statement is effective for the City/ District’s fiscal year ending June 30, 2009.
( r) Estimates
The preparation of basic financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
NOTE 3 - CASH AND INVESTMENTS
The City/ District’s cash and investments at June 30, 2004 are presented as follows:
Cash and investments $ 82,330,103
Restricted cash and investments 11,939,843
Total $ 94,269,946
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IM PROVEMENT DISTRICT
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2004
38
NOTE 3 - CASH AND INVESTMENTS ( Continued)
As of June 30, 2004, the City/ District had the following cash, investments and maturities:
Deposits – Custodial Credit Risk
Custodial credit risk is the risk that in the event of a bank failure, the City/ District’s deposits may not be
returned to it. The City/ District does not have a deposit policy for custodial credit risk on deposits. As of
June 30, 2004, the carrying amount of the City/ District’s deposits was $ 1,590,335 and the bank balance
was $ 1,698,752. The difference between the bank balance and the carrying amount represents
outstanding checks and deposits in transit. Of the bank balance, $ 480,722 was covered by federal
depository insurance and $ 1,218,030 was collateralized by the pledging financial institutions as required
by Section 53652 of the California Government Code.
Under the California Government Code, a financial institution is required to secure deposits in excess of
$ 100,000 made by state or local governmental units by pledging securities held in the form of an
undivided collateral pool. The market value of the pledged securities in the collateral pool must equal at
least 110% of the total amount deposited by the public agencies. California law also allows financial
institutions to secure City/ District deposits by pledging first trust deed mortgage notes having a value of
150% of the secured public deposits. Such collateral is considered to be held in the name of the City.
Investments
Interest Rate Risk – As a means of limiting its exposure to fair value losses arising from rising interest
rates, the City/ District’s investment policy limits the weighted average maturity of the City/ District’s cash
and investment pool to less than five years. The City/ District’s investments in United States Agency
issues are callable. These issues are sensitive to interest rate changes and are callable at par prior to
maturity based on these rate changes.
Investment Maturities ( in Years)
Type Fair Value Less Than 1 1 - 5
Investments:
United States Agency:
Federal Home Loan Bank Bonds $ 3 7,211,680 $ - $ 3 7,211,680
Federal National Mortgage Association Bonds 2 ,008,125 - 2 ,008,125
Federal Home Loan Mortgage Association Bonds 2 ,986,550 - 2 ,986,550
Local Agency Investment Fund 4 9,469,944 4 9,469,944 -
Mutual Funds 9 99,112 9 99,112 -
Total investments 9 2,675,411 $ 5 0,469,056 $ 4 2,206,355
Cash and deposits:
Nonnegotiable certificates of deposits 2 00,000
Demand deposits 1 ,390,335
Cash on hand 4 ,200
Total cash and deposits 1 ,594,535
Total $ 9 4,269,946
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IM PROVEMENT DISTRICT
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2004
39
NOTE 3 - CASH AND INVESTMENTS ( Continued)
Credit Risk – The City/ District’s investment policy limits mutual funds to be consisted of securities and
obligations of the U. S. Government and limits to the highest ranking or the highest letter and numerical
rating by not less then two of the three nationally recognized rating services. The City/ District’s
investment in mutual funds are rated Aaa by Moody’s Investors Service and AAAm by Standard &
Poor’s.
Government Code Section 16429.1 authorizes each local government agency to invest funds in the State
Treasurer’s Local Agency Investment Fund ( LAIF) administered by the California State Treasurer. As of
June 30, 2004, the City/ District’s investment in LAIF is $ 49,469,944. The total amount invested by all
public agencies in LAIF at that date is $ 57,600,699,158. Of that amount, 98.397% is invested in non-derivative
financial products and 1.603% in asset- backed securities. The Local Investment Advisory
Board ( Board) has oversight responsibility for LAIF. The Board consists of five members as designated
by State Statute. The value of the pool shares in LAIF which may be withdrawn is determined on an
amortized cost basis, which is different than the fair value of the City/ District’s position in the pool. The
City/ District’s investment in LAIF is not rated.
NOTE 4 - LOANS RECEIVABLE
Metro Center Senior Homes Project
On July 1, 1995, the Agency agreed to loan $ 6,879,774 to Metro Senior Associates ( Metro) for the
construction of a senior housing project ( Project) to be known as the Metro Center Senior Homes Project.
The loan bears a two percent interest rate. To the extent there is residual cash flow from the Project,
Metro shall pay the entire residual cash flow to the Agency within ninety days of the end of each calendar
year, in satisfaction of principal and interest owed. Residual cash flow is defined as all rents and revenues
derived from the Project less operation and other related costs of the Project. Any outstanding principal
and interest is due and payable in full in forty years.
To finance the loan of $ 6,879,774 to Metro, the Agency sold tax allocation bonds of $ 5,000,000 on
July 27, 1995. The Agency financed the remainder of the loan through its accumulated tax increment
funds. At June 30, 2004, the Agency provided a valuation allowance equal to the loan balance
outstanding in the amount of $ 6,028,721 and the accumulated interest receivable on the loan in the
amount of $ 548,609.
First Time Homebuyer Program
The Agency started the First Time Homebuyer Program to provide low interest second mortgages for
people who live and/ or work in the City/ District who can afford moderate monthly mortgage payments
and require assistance with the down payment in order to purchase their first home. These loans have an
interest rate of 3% and a term of 30 years. However, there are no payments and no accrued interest for
the first five years. The outstanding balance of these loans is $ 409,323 at June 30, 2004. Beginning in
year six, equal monthly payments of principal and interest will commence and continue for the remaining
25 years.
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IM PROVEMENT DISTRICT
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2004
40
NOTE 5 – INTERFUND TRANSACTIONS
Interfund Receivables/ Payables
Due from other funds and due to other funds amounts are current borrowings for working capital
expected to be repaid during the following year. At June 30, 2004, the General Fund is due $ 894,405 and
$ 19,371 from the Community Development Agency Capital Projects Fund and the nonmajor
governmental funds, respectively.
Advance To and From Other Funds
At June 30, 2004, the outstanding balance of advances from the City/ District to the Agency’s Capital
Projects Fund is $ 13,334,107. The advances from the City/ District to the Agency are for administrative
support and capital improvements. The repayment of advances is limited to property tax increment
revenues. The rate of interest on the City/ District advances before and after the fiscal year ended
June 30, 1997 was 8% and 10%, respectively. During the year, $ 1,404,655 in interest on the advances
was accrued and added to the balance. The Agency repaid $ 4,128,738 of the advances during the year.
Annual repayments are scheduled to continue through fiscal year 2009.
Transfers
Transfers are indicative of funding for capital projects or debt service, subsidies of various City/ District
operations and re- allocations of special revenues. The following schedule briefly summarizes the
City/ District’s transfer activity:
__________________
( 1) These transfers are eliminated in the consolidation, by column, for the Governmental and Business- Type Activities.
Source Transfer To Amount Purpose
Nonmajor Enterprise Fund General Fund $ 177,619 Cost reimbursement
General Fund City Capital Projects $ 129,289 Cost reimbursement
Tax Allocation Refunding Bonds Community Development Agency 3,264,950 Debt service transfer
Community Development Agency Nonmajor governmental funds 362,865 Debt service transfer
Nonmajor governmental funds General Fund 866,372 Operating subsidy
Nonmajor governmental funds Nonmajor governmental funds 149,775 Miscellaneous transfers
Internal service funds Internal service funds 91,628 Capital transfers
$ 4,864,879
Between Governmental and Business- Type Activities:
Between Funds within the Governmental or Business- Type Activities ( 1):
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IM PROVEMENT DISTRICT
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2004
41
NOTE 5 – INTERFUND TRANSACTIONS ( Continued)
In the fund financial statements, because of the treatment of transfers of capital assets from and to internal
service funds, reported total transfers out are $ 6,878,766 while reported total transfers in are $ 7,054,568.
During the year, existing capital assets related to governmental funds, with a book value of $ 1,836,268
and $ 2,012,070, were transferred from and into the internal service funds, respectively. No amounts were
reported in the governmental funds as the amounts did not involve the receipt of financial resources.
NOTE 6 – CAPITAL ASSETS
A summary of changes in capital assets for the year ended June 30, 2004 follows:
Balance Balance
July 1, June 30,
2003 Additions Retirements Transfers 2004
Governmental activities:
Capital assets, not being depreciated:
Land $ 9 ,889,396 $ - $ ( 26,624) $ - $ 9 ,862,772
Construction in progress 4 0,035,472 3 ,296,376 - ( 35,847,651) 7 ,484,197
Total capital assets, not being depreciated 4 9,924,868 3 ,296,376 ( 26,624) ( 35,847,651) $ 1 7,346,969
Capital assets, being depreciated:
Infrastructure 8 2,028,297 1 28,594 ( 496,307) 4 ,035,455 8 5,696,039
Buildings 1 8,053,383 - - 2 7,678,838 4 5,732,221
Improvements 2 75,899 - - 3 ,783,091 4 ,058,990
Equipment 3 ,123,902 2 ,146,239 ( 196,156) - 5 ,073,985
Vehicles 4 ,303,581 2 49,531 ( 315,557) 3 50,267 4 ,587,822
Total capital assets, being depreciated 1 07,785,062 2 ,524,364 ( 1,008,020) 3 5,847,651 1 45,149,057
Less accumulated depreciation for:
Infrastructure ( 34,087,349) ( 2,175,818) 4 92,148 - ( 35,771,019)
Buildings ( 2,636,431) ( 1,026,290) - - ( 3,662,721)
Improvements ( 51,092) ( 96,002) - - ( 147,094)
Equipment ( 1,991,619) ( 540,798) 1 75,361 - ( 2,357,056)
Vehicles ( 2,236,630) ( 396,662) 3 11,605 - ( 2,321,687)
Total accumulated depreciation ( 41,003,121) ( 4,235,570) 9 79,114 - ( 44,259,577)
Total capital assets, being depreciated, net 6 6,781,941 ( 1,711,206) ( 28,906) 3 5,847,651 1 00,889,480
Governmental activities capital assets, net $ 116,706,809 $ 1,585,170 $ ( 55,530) $ - $ 118,236,449
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IM PROVEMENT DISTRICT
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2004
42
NOTE 6 – CAPITAL ASSETS ( Continued)
Depreciation
Depreciation expense was charged to governmental functions as follows:
Depreciation expense was charged to the business- type functions as follows:
Balance Balance
July 1, June 30,
2003 Additions Retirements Transfers 2004
Business- type activities:
Capital assets, not being depreciated:
Construction in progress $ 7 12,665 $ 7 36,751 $ - $ ( 467,806) $ 9 81,610
Capital assets, being depreciated:
Infrastructure 5 4,542,259 1 1,522 ( 17) 4 67,806 5 5,021,570
Buildings 4 ,931,749 - - - 4 ,931,749
Equipment 5 50,365 5 ,482 - - 5 55,847
Total capital assets, being depreciated 6 0,024,373 1 7,004 ( 17) 4 67,806 6 0,509,166
Less accumulated depreciation for:
Infrastructure ( 25,803,724) ( 1,467,527) 1 7 - ( 27,271,234)
Buildings ( 639,300) ( 109,595) - - ( 748,895)
Equipment ( 262,917) ( 37,372) - - ( 300,289)
Total accumulated depreciation ( 26,705,941) ( 1,614,494) 1 7 - ( 28,320,418)
Total capital assets, being depreciated, net 3 3,318,432 ( 1,597,490) - 4 67,806 3 2,188,748
Business- type activities capital assets, net $ 3 4,031,097 $ ( 860,739) $ - $ - $ 3 3,170,358
General government $ 559,861
Public safety 166,985
Public works 2,015,100
Community development 22,829
Parks and recreation 533,335
Depreciation on capital assets held by the City/ District’s Internal service funds
is charged to the various functions based on their usage of the assets. 937,460
Total depreciation expense $ 4,235,570
Water $ 1,070,212
Sewer 544,282
Total depreciation expense $ 1,614,494
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IM PROVEMENT DISTRICT
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2004
43
NOTE 6 – CAPITAL ASSETS ( Continued)
Capital Project Commitments
The City/ District has commitments under the following significant capital, infrastructure and other
projects and programs:
Expended
Project through
Project Authorization June 30, 2004 Committed
Design/ Construction - 4th Water Storage Tank $ 9,613,895 $ 744,434 $ 8,869,461
Ryan Park Boardwalk/ Park Improvements 7,197,000 4,900,655 2,296,345
Civic Center Master Plan Improvements 1,259,291 1,052,370 206,921
Street Resurfacing and Repair 1,000,000 1,632 998,368
Parallel Force Main 925,000 145,327 779,673
Park Infrastructure Improvement 680,000 614,281 65,719
East Third Ave. Water Main Extension 425,000 35,341 389,659
Other projects 2,263,873 971,767 1,292,106
Total $ 23,364,059 $ 8,465,807 $ 14,898,252
CITY OF FOSTER CITY AND
ESTERO MUNICIPAL IM PROVEMENT DISTRICT
Notes to the Basic Financial Statements
For the Fiscal Year Ended June 30, 2004
44
NOTE 7 - LONG- TERM OBLIGATIONS
Long- term liabilities at June 30, 2004 consisted of the following:
As of June 30, 2004, the City/ District’s authorized but unissued portions of general obligation bonds and
enterprise revenue bonds totaled $ 3.0 million and $ 2.0 million, respectively.
Outstanding
Interest Amount at June 30,
Type of indebtedness: Maturity Rates Issued 2004
Governmental Activities:
General Obligation Bonds ( a):
1967 Land Reclamation Bonds 2008 6.00% $ 2,741,000 $ 2,541,000
1970 La