CITY OF MILLBRAE
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED JUNE 30, 2006
Prepared by
FINANCE DIVISION,
DEPARTMENT OF GENERAL SERVICES
CITY OF MILLBRAE
Comprehensive Annual Financial Report
For the Year Ended June 30, 2006
TABLE OF CONTENTS
Page
INTRODUCTORY SECTION
Table of Contents....................................................................................................................... ............................. i
Letter of Transmittal.................................................................................................................... ............................ v
Elected Officials and Directory of City Officials ............................................................................................... xvii
Organization Chart ............................................................................................................................... .............. xviii
Our Values ............................................................................................................................... ............................. xix
Our Purposes....................................................................................................................... ................................... xx
GFOA Certificate of Achievement ....................................................................................................................... xxi
CSMFO Certificate of Award .............................................................................................................................. xxii
FINANCIAL SECTION
Independent Auditor’s Report on Basic Financial Statements ............................................................................ 1
Management’s Discussion and Analysis................................................................................................................ 3
Basic Financial Statements:
Government- wide Financial Statements:
Statement of Net Assets .......................................................................................................................... 20
Statement of Activities..................................................................................................................... ...... 21
Fund Financial Statements:
Governmental Funds:
Balance Sheet.......................................................................................................................... .......... 24
Reconciliation of the Governmental Funds- Balance Sheet
with the Statement of Net Assets .................................................................................................... 27
Statement of Revenues, Expenditures, and Changes in Fund Balances........................................... 28
Reconciliation of the Net Change in Fund Balances - Total Governmental
Funds with the Statement of Activities ........................................................................................ 30
CITY OF MILLBRAE
Comprehensive Annual Financial Report
For the Year Ended June 30, 2006
TABLE OF CONTENTS
Page
FINANCIAL SECTION ( Continued)
Proprietary Funds:
Statement of Net Assets.................................................................................................................... 32
Statement of Revenue, Expenses and Changes in Net Assets...................................................... 33
Statement of Cash Flows .............................................................................................................. 34
Notes to Financial Statements................................................................................................................. 35
Required Supplemental Information:
Budgetary Data:
Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual:
General Fund ............................................................................................................................... ..... 62
Redevelopment Agency Special Revenue Fund............................................................................... 63
Notes to Required Supplemental Information ............................................................................................. 66
Supplemental Information:
Major Governmental Funds Other Than the General Fund and Special Revenue Funds:
Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual:
Redevelopment Agency Debt Service Fund .................................................................................... 68
Non- major Governmental Funds:
Combining Balance Sheets .............................................................................................................. 71
Combining Schedules of Revenues, Expenditures, and Changes
in Fund Balances ......................................................................................................................... 78
Combining Schedule of Revenues, Expenditures, and Changes
in Fund Balances- Budget and Actual ......................................................................................... 82
CITY OF MILLBRAE
Comprehensive Annual Financial Report
For the Year Ended June 30, 2006
TABLE OF CONTENTS
Page
FINANCIAL SECTION ( Continued)
Internal Service Funds:
Combining Statement of Net Assets ................................................................................................ 90
Combining Statements of Revenues, Expenses and Changes in Fund Net Assets .......................... 91
Combining Statements of Cash Flows ............................................................................................. 92
STATISTICAL SECTION
Net Assets by Component – Last Four Fiscal Years ............................................................................. 95
Changes in Net Assets- Last Four Fiscal Years..................................................................................... 96
Fund Balances of Governmental Funds – Last Ten Fiscal Years ......................................................... 99
Changes in Fund Balances of Governmental Funds – Last Ten Fiscal Years .................................... 100
Assessed and Estimated Value of Taxable Property – Last Ten Fiscal Years .................................... 102
Property Tax Rates All Overlapping Governments – Last Ten Fiscal Years ..................................... 103
Principal Property Tax Payers- Current Year and Nine Years Ago.................................................... 104
Property Tax Levies and Collections – Last Ten Fiscal Years............................................................ 105
Ratio of Outstanding Debt by Type- Last Ten Fiscal Years ............................................................... 106
Ratio of General Bonded Debt Outstanding – Last Ten Fiscal Years................................................ 107
Computation of Direct and Overlapping Debt ................................................................................... 108
CITY OF MILLBRAE
Comprehensive Annual Financial Report
For the Year Ended June 30, 2006
TABLE OF CONTENTS
Page
STATISTICAL SECTION ( Continued)
Computation of Legal Bonded Debt Margin ....................................................................................... 109
Sewer Fund Revenue Bond and Loan Coverage - Sewer Authority – Last Ten Fiscal Years ........... 110
Bonded Debt Pledged Revenue Coverage Tax Allocation Bonds - Last Ten Fiscal Years .............. 111
Demographic and Economic Statistics - Last Ten Fiscal Years.......................................................... 112
Principal Employees – Current Year .................................................................................................... 113
Full- Time Equivalent City Government Employees by Function- Last Ten Fiscal Years ................ 114
Operating Indicators By Function/ Program......................................................................................... 115
Capital Asset Statistics by Function/ Program- Last Fiscal Year......................................................... 116
ATTACHMENT A
GOVERNMENTAL STRUCTURE, LOCAL ECONOMIC CONDITION
AND OUTLOOK
The City of Millbrae is located on the Peninsula, 15 miles south of San Francisco. The boundaries of
this City extend roughly from the Bayshore Freeway on the east to Skyline Boulevard on the west.
This distance is approximately 1.7 miles. The distance between the north and south City limit line is
approximately 2.05 miles.
Adjacent to the San Francisco International Airport and located in the heart of San Mateo County,
Millbrae is gently cradled in the sun- warmed hills that separate the Pacific Ocean from the
San Francisco Bay. Major freeways border both its eastern and western boundaries, making Millbrae
easily accessible from all parts of the Bay Area. Many hillside homes enjoy beautiful bay views.
Well- cared for middle- class neighborhoods, twelve local parks and the Green Hills Country Club
add to the charm of the residential community.
Millbrae's economic community is a vital mix of retail, shopping, restaurants, service businesses,
hotels and public services. With the BART/ SFO Extension completed, the City has adopted the
Millbrae Station Area Specific Plan in order to attract hotel, office, retail and housing development
to the area around the Millbrae BART station. The Millbrae BART Station provides the only
Intermodal rail connection west of the Mississippi, the first regional rail system in the Bay Area.
This unique station, which is connected to and is adjacent to the San Francisco International Airport,
allows BART, CalTrain and SamTrans to connect under one roof, thereby maximizing regional
travel options to passengers in the Bay Area.
General Information: Population: 20,718; Incorporated: January 14, 1948; San Mateo County Seat
Established: 1856; Registered Voters: 10,547 ( 10/ 06); Number of Households: 7,956 - Occupied.
Elevation: 25 feet at low point; 800 feet at high point Average Temperature: Low of 42 in January;
high of 71 in late September Land Area: 3.2 square miles Population density ( person per sq. miles):
6,473.
Millbrae operates as a General Law City, provides for a Council- City Manager form of government,
which clearly distinguishes the legislative powers of the City Council from the Administrative
powers of the City Manager.
The City Council and City Treasurer are the only bodies elected directly by the residents of Millbrae.
As the legislative branch of the government, the City Council makes final decisions on all major
City matters. The Council adopts ordinances and resolutions necessary for efficient governmental
operations, approves the budget, and acts as a board of appeals. It appoints the City Manager and
City Attorney as well as the members of the City's boards and commissions. The City Manager
manages the day- to- day operations of the City and appoints and dismisses all Department Heads.
General Municipal Elections are held on the first Tuesday after the first Monday in November of
odd- numbered years.
State Economy
The cooling housing market had predictable effects on the California economy during the first eight
months of 2006. Several industries closely tied to real estate slowed significantly. However, a
broader economic slowdown did not emerge.
 Home building stabilized in August following a dramatic drop in July. The pace of residential
permitting rose to 158,000 units ( seasonally- adjusted annual rate) based on a strong pickup ( 31
percent) in multi- family permitting. Single- family construction declined for the second
consecutive month.
 In the first eight months of 2006, the pace of homebuilding was down nearly 16 percent from the
same months of 2005. Single- family permitting was down over 24 percent, while multi- family
was up 7.4 percent. Construction slowed in nearly all major metropolitan areas of California,
with the Sacramento, San Diego, and Stockton regions experiencing the sharpest declines of 42,
39, and 42 percent, respectively. Orange County was the only area which permitted more units.
 In contrast, nonresidential construction sped up significantly during the first eight months of 2006
compared to a year earlier. The value of nonresidential construction permits issued was up 20
percent, led by strong gains in office, hotel/ motel, and parking garage construction. Permitting
accelerated in most major metropolitan
areas. The strongest acceleration
occurred in Orange County and the
Riverside- San Bernardino, San
Francisco, and San Diego regions.
Activity slowed only in the Los Angeles
and Stockton areas, down 2 percent and
26 percent, respectively.
 Home sales in California slowed in
August for the fifth consecutive month.
Sales of existing single- family homes
slipped to a seasonally adjusted annual
rate of 442,200 units. This was 30
percent lower than a year earlier and
was the slowest sales pace since June
1997. Overall, existing home sales
during the first eight months of 2006
were down 23 percent from the same
months of 2005.
 California's median single- family home
price reached $ 576,360 in August, an all- time record according to the California Association of
Realtors. This stretches the upper bounds of the $ 540,000-$ 570,000 range that California home
prices have been in since June 2005. On a year- over- year basis, however, home prices were
nearly stagnant in August. The statewide median price was up only 1.6 percent from a year
earlier. This was the slowest annual increase since March 1997.
 The falloff in real estate activity in 2006 had a predictable impact on California's labor markets.
After growing an average of 6.4 percent in 2004 and 2005, construction employment expanded
only 3.7 percent during the first eight months of 2006 compared to the same months of 2005.
While growth slowed in all but one construction sub- sector, residential building slowed the most
dramatically.
 Retail trade employment was also affected. Its 0.9- percent growth was less than half its 2005
pace. The slowdown was most pronounced at traditional department stores and building
materials and supply stores.
 Finance and real estate industries appear to have been affected more than retail trade. Mortgage
lending activity exploded from 2001 to 2003, as long- term interest rates declined steadily, but
then slowed when interest rates bottomed out between 2004 and 2005. Year- over- year
employment growth at non- depository credit intermediation firms ( which includes mortgage
lenders) slowed to only 3.2 percent during the first eight months of 2006. The growth rate of real
estate agents and brokers in 2006 started out strong and but then faded quickly.
( Source: State of California Department of Finance)
San Mateo County Economy
One of several counties significantly contributing to the economy of the San Francisco Bay Area,
San Mateo’s 531 square miles are part of a continuous urban area stretching from San Jose ( Santa
Clara County) in the south to the city/ county of San Francisco in the north. California’s Department
of Finance estimates San Mateo’s population at more than 724,000. By the year 2020, the county is
projected to exceed 786,000 residents.
San Mateo Co. Employment by Industry - 05 Average
Educational & Health
Services,
9.30%
Natural Resources,
Mining, &
Construction,
5.00%
Manufacturing,
8.80%
Leisure & Hospitality,
9.60%
Trade, Transportation,
& Utilities,
22.90%
Financial Activities,
6.50%
Government,
9.80%
Services,
18.10%
Agriculture,
3.40%
Other Services,
0.60%
Information,
6.30%
Labor Force - San Mateo County’s labor force declined by 700 in 2005 to 363,800; since 2001, the
labor force has cumulatively declined 7.4 percent or 29,000. San Mateo’s 2005 unemployment rate
was down to 4.3 percent after peaking at 5.9 percent in 2003.
Industry Employment - After several years of decline, industry employment in San Mateo
increased by 200 to total 328,000 in 2005. Since 2001, the county’s industry employment has
cumulatively decreased by 11.5 percent ( 42,600 jobs). Despite the overall decline, three industries
recorded employment gains during the years 2001– 2005: educational and health services; leisure and
hospitality; and other services. In educational and health services, both major sectors recorded job
gains: health care and social assistance ( up 800); and educational services ( up 600). Leisure and
hospitality growth was concentrated in amusement, gambling, and recreation ( up 500). Other
services gained 200 jobs. Other services totals generally include employment in establishments such
as equipment and machinery repairing; religious activities, grant- making, and advocacy; and dry
cleaning and laundry services, among others.
City of Millbrae
The economic decline experienced during FY 2001 through FY 2004 has reversed and is in a slow to
moderate recovery. The City’s previously largest revenue source, Transient Occupancy Tax ( Hotel
Tax) decreased by more than 50% has been growing since April of 2004. Although FY 06 Hotel
Tax revenue increased 13.9%, future Hotel Tax growth is projected at the rate of 5% annually. The
hotel/ travel industry has the greatest impact on the local economy and the City’s revenue base. Sales
Tax had declined in previous years, but growth in FY 06 was 15% and future growth is now
projected at the rate of 3% annually.
Property Tax increases are stronger with a five to 10 year perspective. General Fund Property Tax
increased 7.24% in Fiscal Year 2005, 11% in Fiscal Year 2006, and is projected to increase 7% to
3% annually during the next two years. Property values will continue to hold or increase in value for
the foreseeable future. In addition, the City of Millbrae now received $ 1.104 million annually in fire
assessment revenue. However, this revenue is schedule to sunset in the 2008- 09 Fiscal Year. The
City has positioned itself to quickly accommodate large new commercial development surrounding
the Millbrae BART Station with the approval of the Station Area Specific Plan. New high- end
condominium development is to be completed in December 2006 in the Specific Plan area.
ATTACHMENT B
MAJOR INITIATIVES FOR THE YEAR
Central Park Renovation. After being closed all summer for renovation, Central Park
recently reopened in early November. Among the improvements are a full re- grading of the
main open area of the park to create informal turf play areas, new drainage to protect the turf
and keep it playable year- round, removal of outdated play equipment, and improved
accessibility to the playground and Community Center. Further, space is being set aside to
include a bocce ball court and horseshoe pit. The east entry to the park will be enhanced
with a new pathway, stairway, seat wall, and sign, creating a link between the Millbrae
Library and Central Park. Last September, the City Council approved an expanded project
scope to strengthen the link between Central Park, the Library, and the Civic Center by
repaving Lansdale Avenue.
Parking Tax. The City Council of the City of Millbrae approved placing before the voters a
ballot measure to implement a parking tax. The measure was approved in November 2005 by
the voters. The measure implemented a 10% tax on all parking revenue if the parking was not
affiliated with a hotel stay. The measure is expected to provide the City of Millbrae $ 50,000
annually in General Fund revenue.
Shared Services. As a small city, sharing services with neighboring cities is a key strategy
for keeping costs down while maintaining high quality service delivery. Over the past year,
the City succeeded in arranging for the following shared services.
1. Police Communications Services are now provided by San Mateo County saving
Millbrae taxpayers $ 300,000 a year without reducing service levels.
2. The fire department shares a Battalion Chief with San Bruno, which reduces overtime
costs and provides incident command coverage for major emergencies.
3. The City just recently implemented an agreement with three neighboring agencies to
share a fire training division chief. This saves the City $ 100,000 annually and
provides for more consistent training among agencies.
4. While the Recreation Department no longer shares a Director with Burlingame,
Millbrae shares several recreation programs such as adult softball, teen trips, and golf
classes to name a few, with other cities and organizations such as YMCA.
5. In addition to sharing services, the City has cut costs by purchasing and installing a
new telephone system that will save at least $ 307,000 over 10 years. The new
telephone system uses advanced technology to improve communications and staff
productivity.
Cogeneration Project. The City Council approved a major wastewater system improvement
with the construction of an upgrade to the waste water treatment plant’s cogeneration system.
The project is the culmination of 9 months of collaborative planning by the City of Millbrae and
Chevron Energy Solutions, which is engineering and managing the installation as prime
contractor. The new system provides environmental and financial incentives, and replaces
several antiquated plan systems. The new cogeneration/ grease receiving system will efficiently
create and use a free fuel: methane gas produced from restaurant grease. This novel use of wate
kitchen grease will increase by 40% the amount of “ green power” generated by the facility’s
cogeneration plant. As a result, the City is projected to cut electricity use by about 1.5 million
kilowatt- hours each year at a savings of $ 112,000 annually. The lower demand translates to
1,178,000 fewer pounds of carbon dioxide emitted into the environment. The savings created by
the project will fully pay for the system improvements. The project will be operational in
November, 2006.
Wastewater Treatment Plant Renovation. The City’s wastewater collection system and
treatment plan is extensively being renovated, which started in 2006. New, up- to- date treatment
technology that is more energy efficient and capable of meeting increasingly stringent local,
state, and federal clean water regulations will replace deteriorated and obsolete plant equipment
and components. The total project is budget is $ 35 million. The City is applying for low-interest
California state loans and other low- cost financing to pay for the project.
Settlement of Crestview Slide Litigation. Multiple claims relating to the $ 8 million repair of
the Crestview Slide area, damaged by the winter storms of 1999- 2000, were settled.
Re- negotiation of Crestview Slide Loan. A big concern for the past several years has been the
Crestview Slide Loan with the State of California. The City was facing paying $ 2.7 million by
May 2007 for hillside repairs needed for damage created by the winter storms of 2000.
Fortunately, the City successfully renegotiated the Crestview Slide Loan to likely release the
City from its repayment. This has been critical to the City of Millbrae’s financial stability.
Red Light Traffic Camera System. In June of 2006, the City Council approved a proposal to
install red light traffic cameras at Rollins Road and Millbrae Avenue, which could generate
additional revenue for the City but more importantly improve traffic safety. This system will
likely also be placed at Millbrae Ave. and El Camino Real in the coming year.
Sustainable Millbrae Program. The City is taking its civic responsibility seriously by
doing its part to foster a healthier and greener community. Last July, the City Council heard
a presentation by City staff on implementing a variety of “ green” and health related programs
to enhance our current activities. This presentation was a first step in developing programs
that will help to improve the environment and quality of life in Millbrae. The City’s
Environmental Policies Committee presented the Guiding Principles and potential programs
to help build a healthy community and environment. Health- related program areas include
exercise, safety, and nutrition. The environmental programs include pollution prevention,
recycling and waste prevention, Earth Day, water conservation, energy conservation, and air
quality. Health and the environment are interrelated, reducing indoor and outdoor air
pollution, exercising by biking and walking, and gardening and eating right to improve both
personal health and the health of the earth.
The Guiding Principles of this effort include:
• Improve the Health of Residents and Municipal Employees
• Conserve and Preserve the Environment
• Preserve Property Values
• Save Money
• Enhance the Quality of Life & Community Partnerships
These principles will lead to programs that benefit the community, businesses, and
municipal employees. The City will continue our tradition of paving the way and serving
as a role model for others.
ATTACHMENT C
FINANCIAL INFORMATION
Management of the City is responsible for establishing and maintaining an internal control structure
designed to ensure that the assets of the City are protected from loss, theft or misuse and to ensure
that adequate accounting data are compiled to allow for the preparation of financial statements in
conformity with generally accepted accounting principles. The internal control structure is designed
to provide reasonable, but not absolute, assurance that these objectives are met. The concept of
reasonable assurance recognizes that: ( 1) the cost of a control should not exceed the benefits likely
to be derived; and ( 2) the valuation of costs and benefits requires estimates and judgments by
management.
As a recipient of federal, state and local financial assistance, the City is responsible for ensuring that
an adequate internal control structure is in place to ensure and document compliance with applicable
laws and regulations related to these programs. This internal control structure is subject to periodic
evaluation by management and the internal audit staff of the government.
The City maintains extensive budgetary controls. The objective of these controls is to ensure
compliance with legal provisions embodied in the annual appropriated budget approved by the City
Council. Activities of the general fund, special revenue funds and the debt service fund are included
in the annual appropriated budget. Project- length budgets are prepared for the capital projects funds.
The level of budgetary control ( i. e., the level at which expenditures cannot legally exceed the
appropriated amount) is at the fund level. The government also maintains an encumbrance
accounting system as one method of maintaining budgetary control. Encumbered amounts lapse at
year- end. However, outstanding encumbrances generally are re- appropriated as part of the following
year's budget.
As demonstrated by the statements included in the financial section of this report, the City continues
to meet its responsibility for sound financial management.
Cash Management Policies and Practices. During the year, temporarily idle cash was invested in
certificates of deposit, the Local Agency Investment Fund demand deposits, and the San Mateo
County Investment Pool.
The City’s investment policy is to minimize credit and market risks while maintaining a competitive
yield on its portfolio. Accordingly, the majority of deposits were either insured by federal
depository insurance or collateralized. Nearly all investments held by the City at June 30, 2006, are
classified in the category of lowest custodial credit risk as defined by the Government Accounting
Standards Board.
The basic objectives of Millbrae’s investment program are, in order of priority:
1. Safety
2. Liquidity, and
3. Yield.
This Investment Policy is reviewed annually to ensure its consistency with respect to the overall
objectives of safety, liquidity and yield, and its relevance to current laws and financial trends.
Proposed amendments to the Policy shall be prepared by Finance staff and reviewed and approved
by City Manager and the City Council.
Risk Management: The City participates in Association of Bay Area Governments ( ABAG) Plan
Corporation, a non- profit benefit corporation established to provide liability insurance coverage,
claims and risk management, and legal defense to its participating members. ABAG Plan provides
$ 10 million of general liability coverage per occurrence and is responsible for paying claims in
excess of the City’s $ 100,000 deductible. The City has also purchased excess coverage insurance
for worker’s compensation claims from CSAC EIA with a $ 300,000 deductible. In addition, various
risk control techniques, including annual safety audits and employee accident prevention training,
have been implemented to minimize losses.
The City has refrained from duplicating information contained in the “ Management Discussion and
Analysis” ( MD& A) or in the notes to the financial statements.
ATTACHMENT D
OTHER INFORMATION
Independent Audit. State statutes require an annual audit by independent certified public
accountants. The firm of Maze and Associates was awarded a five- year auditing contract ( beginning
in FY 1998- 1999) by the City Council. In addition to meeting the requirements set forth in state
statutes, the audit was also designed to meet the requirements of the federal Single Audit Act
Amendments of 1996 and the related U. S. Office of Management and Budget's Circular A- 133.
Generally accepted auditing standards and the standards set forth in the General Accounting Office's
Government Auditing Standards were used by the auditors in conducting the engagement.
The auditor's report on the basic financial statements and supplemental information is included in the
financial section of this report. The auditor's reports on internal controls and compliance with
applicable laws and regulations can be found in a separately issued single audit report.
Awards. The Government Finance Officers Association of the United States and Canada ( GFOA)
awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Millbrae
for its Comprehensive Annual Financial Report ( the CAFR) for fiscal year ended June 30, 2005.
This was the 11th consecutive year that the City achieved this prestigious national award. In order to
be awarded a Certificate of Achievement, a government must publish an easily readable and
efficiently organized comprehensive annual financial report in conformance with the highest
standards for preparation of a government financial report. This report must satisfy both generally
accepted accounting principles and applicable legal requirements. A Certificate of Achievement is
valid for a period of one year only. Finance management staff is of the opinion that our current
Comprehensive Annual Financial Report continues to meet the Certificate of Achievement
Program’s requirements. The Comprehensive Annual Financial Report will be submitted to the
GFOA to determine its eligibility for another certificate.
The City has also received a similar Certificate of Award from the California Society of Municipal
Finance Officers for the last 10 years, including Fiscal Year 2005. These awards are the highest
awards given for government accounting and financial reporting achievements in the State of
California.
1
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal 2006 is the fourth year the City is required to issue its financial statements in the format prescribed
by the provisions of Government Accounting Standards Board Statement 34 ( GASB 34), which requires
the City to provide this overview of its financial activities for the fiscal year. Reading this analysis with
the accompanying Transmittal Letter and Basic Financial Statements will provide a more comprehensive
overview of the City of Millbrae’s financial condition.
FISCAL 2006 FINANCIAL HIGHLIGHTS
City of Millbrae’s financial situation has turned around with a moderate recovery. This year the General
Fund balance increased to $ 2.7 million, a $ 1.2 million increase from the prior year. The City’s
previously largest revenue source, Transient Occupancy Tax ( Hotel Tax) grew 14% in 2005- 06. Sales
Taxes increased 15% primarily due to the new Millbrae Gas and Market and the new In N Out Burgers.
Higher gasoline prices and a general economic recovery were also key factors in the improvement of sales
tax revenue. Property Taxes grew 11% due to increases in assessed property values. Adjustments of
Vehicle License Fee Adjustment Amount ( VLFAA) for both prior and current years, and in the
Educational Revenue Augmentation Fund ( ERAF) refunds also helped the City’s revenue increase.
Certain revenue enhancements enacted in previous year continued to improve the overall General Fund
revenues. This year the City of Millbrae received $ 1.104 million in fire assessment revenue and $ 0.84
million in franchise fees. $ 430,000 of the franchise fee revenue was from the solid waste franchise,
which increased by 130,000 from the previous fiscal year. The fire assessment revenue was close to prior
year’s receipts.
General Fund expenditures increased $ 1.5 million. Part of the increase in expenditures was due to a one-time
$ 600,000 payment as part of a renegotiated Crestview Slide project loan with the State of California
Office of Emergency Services ( OES). The remaining $ 700,000 expenditure growth was due to increased
contractual services and material and supply costs. The net General Fund balance increased $ 1.2 million
in 2006. Other financial highlights of the year include the following:
· The City’s total net assets increased $ 3 million during Fiscal 2006. On June 30, 2006, net assets
totaled $ 30 million;
· Total City revenues, including program and general revenues, increased to $ 31.7 million, while total
expenses increased to $ 28 million in fiscal 2006;
· Net assets in Governmental funds were $ 14 million, while net assets in business activities were $ 16
million;
· Governmental Program Revenues were $ 5 million;
· Governmental Program Expenses were $ 20 million in fiscal 2006;
· Revenues from Business- Type activities were $ 8.6 million in fiscal 2006;
· Expenses of Business- Type Activities were $ 8.3 million in fiscal 2006;
· General Fund revenues totaled $ 14.1 million and expenditures were $ 13 million, which resulted an
increase of $ 1.1 million over the prior year amounts; and,
· The General Fund balance was $ 2.7 million at the 2006 fiscal year end.
OVERVIEW OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT
This Comprehensive Annual Financial Report is organized in the following six sections:
1) Introductory section, which includes the Transmittal Letter and general information,
2) Management’s Discussion and Analysis ( this part),
3
3) The Basic Financial Statements, which include the Government- wide and the Fund financial
statements, along with the Notes to these financial statements,
4) Required Supplemental Information,
5) Combining statements for Non- major Governmental Funds,
6) Statistical information.
The Basic Financial Statements
The Basic Financial Statements include the City- wide Financial Statements and the Fund Financial
Statements. These two sets of financial statements provide two different perspectives of the City’s
financial activities and financial position.
The City- wide Financial Statements provide a long- term view of the City’s activities as a whole, and
comprise the Statement of Net Assets and the Statement of Activities. The Statement of Net Assets
provides information about the financial position of the City as a whole, including all its capital assets and
long- term liabilities on the full accrual basis, similar to that used by corporations. The Statement of
Activities provides information about all the City’s revenues and all its expenses, also on the full accrual
basis, with the emphasis on measuring net revenues or expenses of each the City’s programs. The
Statement of Activities explains in detail the change in Net Assets for the year.
All of the City’s activities are grouped into Government Activities and Business- type activities, as
explained below. All the amounts in the Statement of Net Assets and the Statement of Activities are
separated into Governmental Activities and Business- type Activities in order to provide a summary of
these two activities of the City as a whole.
The Fund Financial Statements report the City’s operations in more detail than the government- wide
statements and focus primarily on the short- term activities of the City’s General Fund and other Major
Funds. The Fund Financial Statements measure only current revenues and expenditures and fund
balances; they exclude capital assets, long- term debt and other long- term amounts.
Major Funds account for the major financial activities of the City and are presented individually, while
the activities of Non- major funds are presented in summary, with subordinate schedules presenting the
detail for each of these other funds. Major Funds are explained below.
The Government- wide Financial Statements
The Statement of Net Assets and the Statement of Activities present information about the following:
· Governmental activities — All of the City’s basic services are considered to be governmental
activities, including general government, public safety, highway and streets, culture and recreation,
community development, and capital improvements. These services are supported by general City
revenues such as taxes, and by specific program revenues such as building fees.
· The City’s governmental activities include the activities of a separate legal entity, the City of Millbrae
Redevelopment Agency, because the City is financially accountable for the Agency.
· Business- type activities — All City’s enterprise activities are reported here, including water,
wastewater treatment and collection ( sanitation), and storm drains. Unlike governmental services,
these services are supported by charges paid by users based on the amount of the service they use.
The citywide financial statements are prepared on an accrual basis, which means they measure the flow of
all economic resources of the City as a whole.
4
Fund Financial Statements
The Fund Financial Statements provide detailed information about each of the City’s most significant
funds, called Major Funds. The concept of major funds, and the determination of which are major funds,
was established by GASB Statement 34 and replaces the concept of combining like funds and presenting
them in total. Instead, each Major Fund is presented individually, with all Non- major Funds summarized
and presented only in a single column. Subordinate schedules present the detail of these Non- major
funds. Major Funds present the major activities of the City for the year, and may change from year to
year as a result of changes in the pattern of City’s activities.
Fund Financial Statements include governmental, enterprise and internal service funds as discussed
below.
Governmental Fund Financial Statements are prepared on the modified accrual basis, which means they
measure only current financial resources and uses. Capital assets and other long- lived assets, along with
long- term liabilities, are not presented in the Governmental Fund Financial Statements.
Enterprise and Internal Service Fund financial statements are prepared on the full accrual basis, as has
been done in the past, and include all their assets and liabilities, current and long- term.
Since the City’s Internal Service Funds provide goods and services only to the City’s governmental and
business- type activities, their activities are reported only in total at the Fund level. Internal Service Funds
may not be Major Funds because their revenues are derived from other City Funds. These revenues are
eliminated in the citywide financial statements and any related profits or losses are returned to the
activities, which created them, along with any residual net assets of the Internal Service Funds.
Comparisons of “ Budget” and “ Actual” financial information are presented only for the General Fund and
other Major funds that are Special Revenue Funds.
FINANCIAL ACTIVITIES OF THE CITY AS A WHOLE
This analysis focuses on the net assets and changes in net assets of the City’s Governmental Activities
( Tables 1, 2 and 3) and Business- Type Activities ( Tables 4 and 5) presented in the citywide Statement of
Net Assets and Statement of Activities that follow.
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Governmental Activities
Table 1
Governmental Net Assets at June 30, 2006
( in Millions)
Governmental Activities
2006 2005
Cash and investments $ 19.16 $ 19
Other assets 13.36 12
Capital assets 24.01 23
Total assets 56.53 54
Long- term debt outstanding 36.66 37
Other liabilities 5.49 5
Total liabilities 42.15 42
Net assets:
Invested in capital assets, net of debt 8.69 9
Restricted 15.99 12
Unrestricted ( 10.30) ( 9)
Total net assets $ 14.38 $ 12
The City’s net assets from governmental activities increased with a fraction of $ 2 million as June 30, 2006.
This increase is the Change in Net Assets reflected in the Statement of Activities, as shown in Table 2, and
is explained below:
· Cash and investments increased $ 0.6 million from the governmental activities. At June 30, 2006
cash and investments balance increased to $ 19.1 million from the prior year’s balance of $ 18.5
million. Cash and Investments increased $ 3.7 million primarily from General Fund revenue
increases, RDA Debt Service and Housing Fund tax increment increases, and other Governmental
Funds. The increases were further diminished by a $ 3.1 million decrease of cash and investments
in the Redevelopment Capital Project Fund and the Self- Insurance Funds. In RDA Capital
Project Fund cash decreased $ 2 million mainly resulted from a $ 1.3 million loan to the Sanitation
Fund and a $ 0.35 million transfers out to the El Camino Real Improvement project. The Self-
Insurance Funds’ cash decreased $ 1 million due to transfers out of $ 0.6 million to General Fund
for paying out the required OES loan payment and major claims were paid in 2005- 06.
· Other assets increased $ 1.2 million mainly due to a short loan due from Sanitation Fund and from
other funds for covering the funds’ cash deficit at June 30, 2006.
· The increase of $ 1 million in Capital Assets mainly came from the costs for design of a
renovation project to improve both the wastewater treatment facility as well as parts of the sewer
collection system; for the purchase of a new RIMS communication system and equipments for the
Police Department; and for the various vehicles replacements.
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· Long- Term Debt decreased $ 0.5 million primarily from a $ 1.7 million retirement of the OES
Loan and a $ 0.2 million retirement for other debts. On the other hand, $ 1.2 million added to the
POB obligation this year for the accreted value adjustment and a new $ 0.2 million lease purchase
loan was acquired for the phone system. As a result, Long- Term Debt netted with a $ 0.5 million
decrease for the year.
· The aggregate amount of “ Other Liabilities” increased $ 1 million, primarily due to the increased
inter- fund transactions to cover cash deficits at year end, the increased deferred revenues as the
reimbursement grants for the Park Improvement projects not received yet; and the increased
payroll payable accruals resulted from a change of payroll process from semi- monthly to bi-weekly.
· $ 8.7 million of the $ 24 million capital assets were “ Invested in Capital Assets, Net of Related
Debt”.
· Restricted net assets totaled $ 16 million, which includes $ 1 million restricted for capital projects,
$ 3 million earmarked for debt service, $ 9 million set aside for redevelopment, and $ 3 million
restricted for special revenue programs.
· Unrestricted net assets had a deficit of $ 10.3 million primarily due to the long- term debt, thereby
not requiring the current assets to be liquidated.
Fiscal Year 2006 Government Activities
( See Table 2)
Sources of Revenues
Charges for
services
11%
Motor vehicle
in lieu
1%
Misc.
1%
Transfers
1%
Sales taxes
10%
Transient
occupancy tax
12%
Other taxes
8%
Investment
income
4%
Operating
contribution and
grants
12%
Property
taxes
42%
Functiona l E x p ense
Interest
on long-term
debt
14%
Culture
and
Recreatio
n
7%
Communi
ty
Develop.
19%
General
Governme
nt
9%
Public
Safety
44%
Highway
and
Streets
As the Sources of Revenue Chart above shows, $ 9.6 million, or 43% of the City’s Fiscal 2006 revenue,
came from Property Taxes revenues. Property Taxes increased $ 1.1 million due to improved property
values, increased Vehicle License Fee Adjustment Amount ( VLFAA) for both current and prior years,
and the result from a property tax audit performed by MBIA. Sales Taxes and Transient Occupancy Tax
accounted for $ 2.3 million and $ 2.6 million respectively. The total general revenues of $ 17.3 million,
accounted for 77% of the 2006 Governmental revenues.
The Functional Expenses Chart above includes only current year expenses, which are discussed in detail
below. It does not include capital outlays, which are now reflected in the City’s capital assets. In Fiscal
Year 2006, the City added $ 1 million in governmental capital assets, as shown in detail at Table 6.
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The Statement of Activities presents program revenues and expenses and general revenues in detail. All
these are elements in the Charges in Governmental Net Assets are summarized below.
Table 2
Changes in Governmental Net Assets
( in Millions)
Governmental Activities
2006 2005
Expenses
General government $ 1.76 $ 1.42
Public Safety 8.82 8.83
Highway and Streets 1.47 1.63
Culture and Recreation 2.14 1.97
Community Development 3.03 3.10
Interest on long- term debt 2.92 1.48
Total Expenses $ 20.14 $ 18.43
Revenues
Program revenues:
Charges for services 2.73 2.04
Operating contributions and grants 2.76 1.33
Developmental impact fees and permits 0.0 0.0
Total program revenues 5.49 3.37
General revenues:
Taxes:
Property taxes 9.64 8.54
Sales taxes 2.25 1.88
Transient occupancy tax 2.60 2.28
Other taxes 1.69 1.17
Motor vehicle in lieu 0.13 0.49
Investment income 0.50 0.72
Miscellaneous 0.23 0.18
Transfers - 0.05 0.01
Total general revenues 16.99 15.27
Total revenues 22.48 18.64
Change in net assets $ 2.34 $ 0.21
Table 3 presents the net cost of each of the City’s largest programs: General Government, Public Safety,
Highway and Streets, Culture and Recreation, Community Development, and Interest on long- term debt.
Net cost is defined as the total program cost less the revenues generated by those specific activities.
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Table 3
Governmental Activities
( in Millions)
Net ( Expense) Revenue
From Services
2006 2005
General Government $ ( 0.4) $ ( 1.3)
Public Safety ( 7.9) ( 8.0)
Highway and Streets 0.2 ( 0.4)
Culture and Recreation ( 1.2) ( 1.3)
Community Development ( 2.5) ( 2.6)
Interest on Long- term Debt ( 2.9) ( 1.5)
Totals $ ( 14.7) $ ( 15.1)
· $ 7.9 million of program net expenses over revenues came from Public Safety. The 2005- 06
Public Safety net deficit improved slightly from the prior year level. General Fund Police
expenditures increased $ 0.4 million mainly from a $ 0.27 million increase in contractual services
for operations and the rest was from a new Police Chief hired and compensation increases netted
out with a $ 0.06 million savings for contracting out the Dispatcher Services with the San Mateo
County. The General Fund Fire expenditures were $ 0.3 million lower than the prior year
primarily resulted from a $ 0.2 million reduction in overtime cost and $ 0.1 million savings in
Emergency Medical Services program.
· Highway and Streets net revenues over expenses increased $ 0.6 million comparing to last year.
Revenues increased $ 0.4 million mainly from the new developer fees, while expenses decreased
$ 0.2 million as a result of the GASB 34 consolidation adjustments.
· Culture and Recreation expenses over revenues decreased $ 0.1 million. The deficit decreased
due to a $ 0.3 million increase in revenues netted with a $ 0.2 million increase in expenses. The
revenues increased because grants reimbursements received in this year and the new developer
fees assessed for parks improvements. The expenses increased due to higher recreation
programs’ costs and personnel costs.
· Community Development net expenses over revenues improved $ 0.1 million, mainly resulted
from a $ 0.07 million increase in revenues and a $ 0.06 million decrease in expenses. The 2006
revenues and expenses were very close the prior year’s level.
· The interest on long- term debt increased by $ 1.4 million mainly from a $ 1.2 million increase in
POB obligation for the accreted value adjustment and a $ 0.2 million increase from the Sanitation
Fund debt, the new Co- Generation Loan.
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Business- type Activities
Table 4
Business- Type Net Assets
( in Millions)
Business- Type Activities
2005 2005
Cash and investments $ 4.35 $ 7.25
Other current assets 1.78 1.60
Internal balances ( 0.76) 0.59
Capital assets and other 18.60 13.31
Total assets $ 23.97 $ 22.75
Long- term debt outstanding 6.25 6.45
Other liabilities 1.63 1.09
Total liabilities 7.88 7.54
Net assets:
Invested in capital assets, net of debt 16.68 11.19
Unrestricted ( 0.59) 4.03
Total net assets $ 16.09 $ 15.22
Net assets for Business- type Activities increased $ 0.9 million. Cash and Investments decreased $ 2.9
million. This was due to a $ 6.52 million decrease in cash for the Co- Generation, the Sewer System
Rehabilitation, the Water Main, and the Storm Drain projects’ capital and related debt expenses; a $ 2.03
million cash increase from operating activities; and a $ 1.6 million increase mainly from the $ l. 5 million
Sewer Fund loans borrowed from the Water Fund and the RDA Capital Project Fund. The loans
borrowed were used for the start up costs incurred on the Waste Water Treatment Facility and Sewer
System Improvement Project. Other Current Assets increased $ 0.18 million due to a one- time billing
adjustment and increased accrual amount for May and June revenues. The increased May and June
increased revenues resulted from rates increases. Internal Balances liability increased $ 1.4 million
primarily due to the Sewer Fund Loans borrowed in 2005- 06. $ 5.3 million increase in Capital Assets –
Net of Accumulated Depreciation primarily for the various Enterprise Funds’ capital outlays as
mentioned above. Long- Term Debt decreased $ 0.2 million from retirement of the Co- Generation Project
debt for the current year portion. Other Liabilities increased $ 0.5 million mainly for the Sanitary Sewer
Rehabilitation and the Co- Generation projects’ accounts payable and accrual as June 30, 2006.
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Table 5
Changes in Business- Type Net Assets
( in Millions)
Business
- Type -
Activities
2006 2005
Net: Revenues from Business- type activities
Municipal Water System $ 0.36 $ 0.13
Waste Water Treatment Facility ( Sanitation) 0.08 ( 0.15)
Storm Drain ( 0.14) ( 0.10)
Total Business- type Activities $ 0.30 ($ 0.12)
The Business- Type net revenues over expenses increased $ 0.4 million after netted out with an allocation
of the Internal Service Funds’ net deficit for the year. Water Fund revenues increased slightly and
expenses, on the other hand, decreased, which resulted in a net increase for the year. Although the
Sanitation Fund expenses increased considerably, the Fund net assets increased due to a strong growth in
revenues resulted from rate increase. The Storm Drain Fund’s net decrease due to the Fund’s net income
from operations was not sufficient to cover the net loss allocated from Internal Service Funds.
As shown in the “ Statement of Cash Flows,” Net Cash Flows decreased $ 2.9 million. Water Fund cash
flow decreased $ 0.4 million, Sanitation Fund decreased $ 2.3 million, and Storm Drain Fund decreased
almost $ 0.2 Million. The cash flow decreased mainly from capital expenses for the Co- Generation, the
Sewer System Rehabilitation, the Water Main, and the Storm Drain projects.
The City’s Fund Financial Statements
Governmental Funds
At June 30, 2006, the City’s governmental funds reported combined fund balances of $ 18.6 million,
which was a $ 2.2 million increase or 13.2% compared to the prior year. General Fund accounted for $ 1.2
million of the increase and another $ 1 million increase was from Other Governmental Funds: mainly the
Park Capital Improvement Fund and the Millbrae Station Area Developer Permit Fund.
Governmental fund revenues increased $ 1.6 million this year to a new total of $ 21 million primarily due
to a 1 million increase in General Fund and $ 0.5 million increase in the Redevelopment Agency Debt
Service and Housing funds. Expenditures decreased $ 6.5 million this year to $ 19.4 million. The decrease
in expenditures mainly resulted from a $ 5.3 million decrease in Redevelopment Capital Project Fund,
$ 3.5 million decrease in Library Project Fund, which further netted out with a $ 1.5 million increase in the
General Fund, a $ 0.5 million increase Developer Fee Fund, and a $ 0.2 million increase in Redevelopment
Agency Capital Project Fund.
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Proprietary Funds
Enterprise Fund net assets totaled $ 16.1 million at June 30, 2006, an increase of $ 0.9 million from the
prior year. Water Fund net assets increased $ 0.5 million, Sanitation Fund assets increased $ 0.3 million,
and Storm Drain Fund increased $ 0.1 million. Operating revenues increased $ 1.2 million, primarily due
to an $ 0.8 million sewer rate increase, a $ 0.27 million prior year water billing adjustment and a higher
accrual amount for this year’s May and June water sales, and a $ 0.16 million from a one- time
reimbursement to Storm Drain Fund by the BART. Operating expenses increased $ 0.3 million. Of which
Sanitation Fund accounted for $ 0.4 million expenses increase due to higher costs for maintaining the
City’s sanitary sewer system: higher salaries and benefits, contractual services, materials and supplies.
On the other hand, Water Fund expenses decreased $ 0.1 million from the prior year. Non- Operating
revenues over expenses increased primarily due to higher interest income and a one- time loan forgiveness
from General Fund.
ANALYSES OF MAJOR GOVERNMENTAL FUNDS AND PROPRIETARY FUNDS
General Fund
The General Fund balance increased to $ 2.7 million, a $ 1.2 million increase from the prior year.
Revenues reached $ 14.1 million, which is $ 1 million higher than the prior year’s level. The three major
revenues performed well in 2005- 06. Property taxes increased $ 0.6 million, of which $ 0.2 million
resulted from a retro- adjustment for the 2004- 05 VLFAA; $ 0.2 million from property value increases; and
$ 0.2 million from ERAF refunds. Transient Occupancy Tax continued with a moderate recovery, which
increased 14% over the 2004- 05 level. Sales Taxes increased $ 0.3 million due to the new Millbrae Gas
and Market and the new In N Out Burgers opened in 2005- 06. The higher gasoline price and a general
economic recovery also contributed to the overall increase in Sales Taxes. Even though there were no fee
increases in 2005- 06, Permits and Licenses increased $ 0.14 million primarily due to higher assessed
valuation on buildings because construction costs were higher than a year ago. The high valued new
development at 1355 El Camino Real also contributed to the revenue increase for Permits and Licenses.
Other Taxes increased $ 0.15 million. Of this amount, a $ 0.13 million was from the refuse franchise fee
and other franchise fees. Use of Money and Property revenues decreased $ 0.06 million due to a
downward $ 0.1 million in fair value adjustments for the investments with the San Mateo County and the
LAIF Pools. Miscellaneous Revenues decreased $ 0.2 million mainly due to a one- time reimbursement in
2004- 05 for the Library Project costs incurred and advanced by the General Fund.
General Fund expenditures were up $ 1.5 million from the prior year level. $ 0.6 million was paid to the
State of California Office of Emergency Services ( OES), which was a pre- requisite for amending the OES
Loan for the Crestview Slide Repair project. General Government expenditures increased $ 0.3 million,
primarily for the TM1 software license and consulting services for the budget and financial reporting
enhancements; higher utilities costs, and a new Accounting Technician was hired. Replacement of the 10
year old financial system server and the line printer, the purchase of Microsoft Office 2003 software
licenses, and a two year maintenance contract for the MacAfee active virus scan also contributed to the
over all increases in the General Government expenditures. Culture and Recreations increased $ 0.2
million due to a Maintenance Technician and a Maintenance Worker hired. Highway and Streets
increased $ 0.14 million primarily due to a full- time Maintenance Worker assigned, higher building
maintenance costs and a general increase in salaries and benefits. Capital Outlay increased $ 0.17 million,
primarily for a purchase of the new RIMS communication system and equipments for the Police
Department and an upgrade of the Recreations Center’s bathroom in compliance with the ADA
compliance.
On April 25, 2006 the City entered into a capital lease purchase agreement in the amount of $ 246,658 for
the new City- wide telephone system, of which $ 188,074 was for phone equipments purchase.
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This year the “ Transfers In” was primarily from the General Liability Fund for the $ 0.6 million loan
payout to the State of California OES for the Crestview Slide project. “ Transfers Out” increased $ 0.18
million because $ 0.09 transferred to a newly created Police Vehicles Maintenance Fund, a one- time
transfer of $ 0.05 million to the Storm Drain Fund, and a general increase in operating subsidies to other
funds.
At June 30, 2006, the General Fund Balance comprised of $ 1.3 million reserved almost entirely for
encumbrances and advances to other funds, with a $ 1.4 million left for unreserved and undesignated fund
balance. The unreserved amount increased $ 1.3 million in 2005- 06 mainly as a result of revenue growth.
The unreserved amount would be increased further if the Advance Receivable of $ 1 million from
Redevelopment Agency were to be paid back.
Other Major Governmental Funds
Redevelopment Agency Special Revenue
The tax increment revenues increased 18% over the prior year, of which 8% due to increase in property
assessment value and 10% increase resulted from MBIA audit. The Use of Money and Property
decreased primarily due to fair value adjustment for portfolios with the San Mateo County Investment
Pool. The expenditures increased slightly primarily from salaries and benefits increase.
Redevelopment Agency Debt Service
Redevelopment Agency Debt Service Fund balance increased to $ 2.1 million, a $ 0.4 million increase
from the prior year. Tax increment revenues increased 19% over the prior year primarily resulting from
the MBIA audit and subsequent increased assessment valuations. Although Interest Income increased,
the overall Use of Money and Property decreased, because of downward fair value adjustments for
portfolios with San Mateo and LAIF investment pools. Expenditures decreased $ 5.3 million due to in
2004- 05 a $ 5 million payoff for the retirement of 1993 Bonds and $ 0.5 million for the 2005 Bonds
issuance and insurance costs. Proceeds from Long Term Debt decreased $ 5.5 million mainly as result of
the 2005 Bonds’ proceeds, which were received in the prior year. Transfers Out increased $ 0.4 million,
which was authorized to cover the Redevelopment Agency Administration Fund’s cash deficits as of June
30, 2006. At June 30, 2006 the entire RDA Debt Service fund balance was reserved for debt service
obligations. The outstanding Advance from Other Funds was $ 1.7 million at yearend.
Redevelopment Agency Capital Projects Fund
The Redevelopment Agency Capital Projects Funds are composed of the RDA Administration Operating,
the RDA Capital Project and the Housing Capital Project funds. The Capital Projects Funds operations
netted with a $ 0.6 million deficit for the year. Revenues decreased slightly. Expenditures increased $ 0.2
million mainly for consulting service costs for the bidding and construction review services for upgrading
both the El Camino Real Median and the Sidewalk Trees, for the fiscal review and feasibility analyses
regarding Station Area Specific Plan Sites, and for the preparation in connection with the Hotel Signage
Plan. Proceeds from Long Term Debt decreased $ 3.1 million, since this portion of the 2005 RDA Bonds’
proceeds was designated for development opportunities in the redevelopment areas. Transfers In
increased $ 0.43 million to cover the cash deficit in the RDA Administration Fund, which was authorized
and transferred from the RDA Debt Service Fund. The $ 0.35 million Transfers Out was used to fund the
El Camino Real Landscaping Improvement project. At June 30, 2006, the RDA Capital Projects fund
balance decreased to $ 6.2 million.
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Millbrae Station Area Developer Fees Capital Project
Developer Fees Capital Project Fund balance decreased $ 0.5 million resulted from the capital
improvements for the waste water treatment facility and parts of the sewer collection system. Developer
fees were primarily collected in the previous years. The fees were formulated to mitigate the impact on
various city facilities. Part of theses fees were allocated to the Sanitation Fund. The City has used this
equitable share to assist with the design of a renovation project to improve both the wastewater treatment
facility as well as parts of the sewer collection system. An important design element of the treatment
plant upgrades is the addition of a one million gallon flow equalization tank. Currently, Millbrae’s sewer
system does not have any capability to store the extra wastewater, which flows to the plant as a result of
the storm water. At times, very heavy storms have caused sanitary sewer overflows, which the City wants
to prevent. In addition, most of the antiquated equipment, which is in the current influent pump station, is
planned to be moved to the new flow equalization tank. This will enable treatment plant processes to be
stabilized and made more efficient over time. Also, as a result of the renovation project, several aeration
motors, blowers and pipes need to be upgraded. These currently sit below the current treatment plant
operations center. This means the center must be moved. Part of the developer funds is thus being used
to assist with the design of a new operations center. The plan is to use this center to co- locate other
nearby public works functions, which will increase department efficiency and provides for the
replacement of sub- standard facilities for Public Work’s field supervisors and managers and their staff.
At June 30, 2006, the fund balance was $ 0.6 million.
Other Governmental Funds
These funds are not presented separately in the Basic Financial statements, but are individually presented
as Supplemental Information.
Proprietary Funds
Water
Net assets of the Water Fund increased $ 0.5 million in the current year to a total of $ 8.1 million. Total
Water operating and non- operating revenues increased $ 0.3 million from a year ago. Water Sales
increased $ 0.2 million due to prior year billing adjustment and increased revenue accrual for May and
June water sales as a result of water rate increases. The improved interest earnings and a reimbursement
from Burlingame for the shared utilities costs accounted for the remaining $ 0.1 million increase in Water
revenues. The City of Burlingame reimbursed Millbrae for a total of $ 0.07 million in shared electricity
costs at the Madera and Larkspur pump stations and the water usage through Helen Turnout.
Additionally Water Fund expenses were $ 0.1 million lower than a year ago.
Waste Water Treatment Facility ( Sanitation)
The Sanitation Fund’s net assets increased $ 0.2 million in Fiscal Year 2006 to a total of $ 6.9 million.
Sewer service fees increased $ 0.8 million mainly due to a 26% sewer rate increase effective July 1, 2005,
from $ 1 per unit to $ 2.26 per unit. Since the winter consumption units billed in this year were lower, the
overall sewer billing revenue increased 20% over a year ago. On the other hand, total Sanitation Fund
expenses increased $ 0.4 million, primarily due to increased salaries and benefits costs and higher costs in
contractual services and materials for the City’s sanitary sewer systems maintenances.
Investments in Capital Assets- Net of Related Debt increased $ 5 million since capital expenditures were
incurred in 2005- 06 for the Co- Generation project and the Water Pollution Control Phase I project. The
$ 6.9 million of Sanitation Fund Net Assets included $ 9.8 million of Invested in Capital Assets- Net of
Related Debt, which resulted with a deficit of $ 2.7 million in Unrestricted Net Assets.
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Storm Drain
The Storm Drain Fund net assets increased $ 0.1 million, primarily due to a one- time reimbursement from
BART and the forgiveness of a General Fund loan. Storm Drain Fee revenue continued to weaken and
could not fully cover all the expenses.
Total Invested in Capital Assets Net of Related Debt accounted for $ 1.1 Million, while the Unrestricted
Net Assets balance resulted a deficit $ 0.1 Million.
CAPITAL ASSETS
At the end of fiscal 2006 the City had $ 24 million, net of depreciation, invested in a broad range capital
assets used in governmental activities, as shown in Table 6 below ( further detail may be found in Note 6
to the financial statements):
Table 6
Capital Assets at Year- end
( in Millions)
Government Activities
2006 2005
Governmental Activities:
Land $ 1.97 $ 1.97
Land improvements 0.89 0.86
Buildings and improvements 19.80 19.66
Equipment 3.99 2.84
Automobiles and Trucks 2.20 2.21
Infrastructure 2.86 2.55
Less accumulated depreciation ( 7.70) ( 7.09)
Totals $ 24.01 $ 23.00
Business- type Activities
Land $ 0.00 $ 0.00
Land improvements 0.23 0.38
Buildings 5.88 4.88
Equipment 13.02 7.98
Infrastructure 16.19 14.49
Automobiles and Trucks .05 .05
Less accumulated depreciation ( 16.77) ( 15.52)
Totals $ 18.60 $ 12.26
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The City depreciates all its capital assets via a straight- line depreciation method. This means the cost of
the asset is divided by its expected useful life in years.
Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest
incurred during the construction phase is reflected in the capitalized value of the asset constructed, net of
interest earned on the invested proceeds over the same period.
DEBT ADMINISTRATION
Each of the City’s debt issues is discussed in detail in Note 7 to the financial statements. In 2004, the
City issued $ 11.5 million in Pension Obligation Bonds to payoff the unfounded accrued actuarial liability
( the UAAL) with the California Public Employees Retirement System ( the CalPERS). This action was
taken according to the General Fund balancing plan. The City Council decided to choose the capital
appreciation bond option with a 30- year debt term to finance the required amount to payoff the UAAL
with CalPERS. In 2006 the City engaged in a Lease Purchase Financing for the new phone system,
which has upgraded the City’s phone system with modern technology.
Table 7
Outstanding Debt
( in Millions)
2006 2005
Governmental activities
Tax Allocation Bonds ( issued by the
Redevelopment Agency) $ 8.54 $ 8.59
Certificates of Participation 3.52 3.63
Public Library Project Bonds 10.52 10.55
Pension Obligation Bonds Series A- 2 12.9 11.66
Natural Disaster Assistance Loan 1.00 2.69
2006 Lease Purchase Financing – Phone System 0.19 0.00
$ 36.66 $ 37.12
Business- type Activities
Wastewater Bank Loan – Sanitary Sewer Project $ 6.25 $ 6.45
$ 6.25 $ 6.45
SPECIAL ASSESSMENT DISTRICT DEBT
There is no new special assessment district debt since June 30, 2005.
ECONOMIC OUTLOOK AND MAJOR INITIATIVES
The economy of the City and its major initiatives for the coming year are discussed in detail in the
accompanying Transmittal Letter.
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CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This Comprehensive Annual Financial Report is intended to provide citizens, taxpayers,
investors, and creditors with a general overview of the City’s finances. Questions about this
Report should be directed to Christine Ma, Financial Services Manager, Finance Division, City
of Millbrae, at 621 Magnolia Avenue, Millbrae, California 94030.
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CITY OF MILLBRAE
STATEMENT OF NET ASSETS
AND STATEMENT OF ACTIVITIES
The Statement of Net Assets and the Statement of Activities summarize the entire City’s financial
activities and financial position. They are prepared on the same basis as is used by most businesses,
which means they include all the City’s assets and all its liabilities, as well as all its revenues and
expenses. This is known as the full accrual basis— the effect of all the City’s transactions is taken into
account, regardless of whether or when cash changes hands, but all material internal transactions between
City funds have been eliminated.
The Statement of Net Assets reports the difference between the City’s total assets and the City’s total
liabilities, including all the City’s capital assets and all its long- term debt. The Statement of Net Assets
focuses the reader on the composition of the City’s net assets, by subtracting total liabilities from total
assets.
The Statement of Net Assets summarizes the financial position of all the City’s Governmental Activities
in a single column, and the financial position of all the City’s Business- Type Activities in a single
column; these columns are followed by a Total column that presents the financial position of the entire
City.
The City’s Governmental Activities include the activities of its General Fund, along with all its Special
Revenue, Capital Projects and Debt Service Funds. Since the City’s Internal Service Funds service these
Funds, their activities are consolidated with Governmental Activities, after eliminating inter- fund
transactions and balances. The City’s Business- Type Activities include all its Enterprise Fund activities.
The Statement of Activities reports increases and decreases in the City’s net assets. It is also prepared on
the full accrual basis, which means it includes all the City’s revenues and all its expenses, regardless of
when cash changes hands. This differs from the “ modified accrual” basis used in the Fund financial
statements, which reflect only current assets, current liabilities, available revenues and measurable
expenditures.
Both of these Statements include the financial activities of the City, and the City of Millbrae
Redevelopment Agency, which is legally separate but are component unit of the City because it is
controlled by the City, which is financially accountable for the activities of this entity.
19
CITY OF MILLBRAE
STATEMENT OF NET ASSETS
JUNE 30, 2006
Governmental Business- Type
Activities Activities Total
ASSETS
Cash and investments ( Note 3) $ 16,493,906 $ 3,384,453 $ 19,878,359
Cash with fiscal agent ( Note 3) 2,666,435 965,733 3,632,168
Receivables:
Taxes 689,195 689,195
Accounts - net 355,473 1,780,418 2,135,891
Accrued interest 214,946 214,946
Due from other governmental agencies 512,865 52,926 565,791
Loans ( Note 5) 683,470 683,470
Internal balances ( Note 4D) 814,157 ( 814,157)
Prepaid items 5,000 5,000
Prepaid pension obligations ( Note 7C) 10,075,632 10,075,632
Capital assets, ( Note 6)
Nondepreciable capital assets 1,967,619 1,967,619
Depreciable capital assets, net 22,048,031 18,595,930 40,643,961
Total Assets 56,526,729 23,965,303 80,492,032
LIABILITIES
Accounts payable and accrued payroll 924,173 1,102,237 2,026,410
Interest payable 444,849 49,764 494,613
Deposits 1,241,688 232,579 1,474,267
Unearned revenue 202,224 202,224
Compensated absences ( Note 1G)
Due within one year 139,727 100,355 240,082
Due in more than one year 1,905,091 142,551 2,047,642
Noncurrent portion accrued self- insurance ( Note 11) 627,449 627,449
Long- term debt ( Note 7)
Portion due within one year 285,288 209,830 495,118
Portion due in more than one year 36,379,542 6,044,588 42,424,130
Total Liabilities 42,150,031 7,881,904 50,031,935
NET ASSETS ( Note 8)
Invested in capital assets, net of related debt 8,693,759 16,675,966 25,369,725
Restricted for:
Capital projects 984,730 984,730
Debt service 2,951,604 2,951,604
Redevelopment 8,891,956 8,891,956
Special revenue programs 3,157,516 3,157,516
Total Restricted Net Assets 15,985,806 15,985,806
Unrestricted ( 10,302,867) ( 592,567) ( 10,895,434)
Total Net Assets $ 14,376,698 $ 16,083,399 $ 30,460,097
See accompanying notes to financial statements
20
CITY OF MILLBRAE
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2006
Net ( Expense) Revenue and
Program Revenues Changes in Net Assets
Operating
Charges for Grants and Governmental Business- type
Functions/ Programs Expenses Services Contributions Activities Activities Total
Governmental Activities:
General government $ 1,762,874 $ 283,146 1,086,858 ($ 392,870) ($ 392,870)
Public safety 8,812,931 666,536 $ 191,627 ( 7,954,768) ( 7,954,768)
Highways and streets 1,471,951 277,206 1,424,140 229,395 229,395
Culture and recreation 2,139,492 921,774 54,357 ( 1,163,361) ( 1,163,361)
Community development 3,032,777 578,609 ( 2,454,168) ( 2,454,168)
Interest on long- term debt 2,922,699 ( 2,922,699) ( 2,922,699)
Total Governmental Activities 20,142,724 2,727,271 2,756,982 ( 14,658,471) ( 14,658,471)
Business- type Activities:
Municipal water system 3,485,307 3,852,907 $ 367,600 367,600
Municipal waste water treatment facility 4,453,699 4,530,967 77,268 77,268
Storm drain 365,307 220,445 ( 144,862) ( 144,862)
Total Business- type Activities 8,304,313 8,604,319 300,006 300,006
Total $ 28,447,037 $ 11,331,590 $ 2,756,982 ( 14,658,471) 300,006 ( 14,358,465)
General revenues:
Taxes:
Property taxes 9,018,720 9,018,720
Incremental property tax 624,721 624,721
Sales taxes 2,248,317 2,248,317
Transient occupancy tax 2,603,820 2,603,820
Other taxes 1,695,514 1,695,514
Motor vehicle in- lieu, unrestricted 128,267 128,267
Investment earnings 495,832 196,813 692,645
Miscellaneous 229,921 319,829 549,750
Transfers ( 50,000) 50,000
Total general revenues and transfers 16,995,112 566,642 17,561,754
Change in Net Assets 2,336,641 866,648 3,203,289
Net Assets- Beginning 12,040,057 15,216,751 27,256,808
Net Assets- Ending $ 14,376,698 $ 16,083,399 $ 30,460,097
See accompanying notes to financial statements
21
FUND FINANCIAL STATEMENTS
GASB 34 revises the format of the Fund Financial Statements so that only individual major funds are
presented, while non- major funds are combined in a single column. Major funds are defined generally as
having significant activities or balances in the current year. No distinction is made between Fund types.
MAJOR GOVERNMENTAL FUNDS
The funds described below were determined to be Major Funds by the City in fiscal 2006. Individual
non- major funds may be found in the Supplemental section.
GENERAL FUND
The General Fund is established to account for the revenues and expenditures to carry out basic
governmental activities of the City such as general government, public safety, highway and street, culture
and recreation, and community development. This fund accounts for all financial transactions not
accounted for in the other funds.
REDEVELOPMENT AGENCY SPECIAL REVENUE FUND
To account for property tax increments received by the Millbrae Redevelopment Agency to use for Low
and Moderate- Income Housing Programs.
MILLBRAE STATION AREA DEVELOPER FEE – CAPITAL PROJECTS FUND - To account
for the fees collected from the developers for the capital activities of the Millbrae Station Area
development project.
REDEVELOPMENT AGENCY DEBT SERVICE FUND
To account for the accumulation of resources for payment of principal and interest on Millbrae
Redevelopment Agency debt. The Agency receives revenues from property tax increments.
REDEVELOPMENT AGENCY CAPITAL PROJECTS FUND
To account for the Millbrae Redevelopment Agency’s resources for administrative costs, capital projects
and long- term debt obligation.
23
CITY OF MILLBRAE
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2006
Millbrae
Station Area
Redevelopment Developer Redevelopment
Agency Fee - Capital Agency
Special Revenue Capital Projects Debt Service
General Fund Fund Fund
ASSETS
Cash and investments ( Note 3) $ 772,576 $ 1,955,017 $ 3,148,609
Cash with fiscal agent ( Note 3) 189,399 $ 1,391,956 543,913
Receivables:
Taxes 689,195
Accounts - net 26,744
Accrued interest 124,213 90,733
Due from other funds ( Note 4A) 1,026,030
Due from other governmental agencies 85,911
Loans ( Note 5) 683,470
Advances to other funds ( Note 4B) 1,040,100
Prepaid items
Total Assets $ 3,954,168 $ 2,638,487 $ 1,391,956 $ 3,783,255
LIABILITIES
Accounts payable and accrued payroll $ 682,891 $ 100,248
Due to other funds ( Note 4A) 227,328
Deposits 364,311 $ 543 458,059
Deferred revenue 202,224
Advances from other funds ( Note 4B) $ 1,690,100
Total Liabilities 1,249,426 543 785,635 1,690,100
FUND BALANCES
Fund balance ( Note 8)
Reserved for:
Encumbrances 265,452 6,750
Debt service 2,093,155
Capital outlay 1,947,723
Advances, prepaids and loans receivable 1,040,100 683,470
Unreserved:
Designated
Special Revenue Funds prior year
operating budget carryovers
Special Revenue Funds capital outlay
Undesignated, Reported in:
General Fund 1,399,190
Special Revenue Funds 1
Capital Projects Funds 606,321
Total Fund Balances 2,704,742 2,637,944 606,321 2,093,155
Total Liabilities and Fund Balances $ 3,954,168 $ 2,638,487 $ 1,391,956 $ 3,783,255
See accompanying notes to financial statements
24
Redevelopment
Agency Other Total
Capital Projects Governmental Governmental
Fund Funds Funds
$ 4,808,168 $ 4,821,031 $ 15,505,401
541,167 2,666,435
689,195
328,729 355,473
214,946
1,462,043 2,488,073
426,954 512,865
683,470
1,040,100
5,000 5,000
$ 6,270,211 $ 6,122,881 $ 24,160,958
$ 16,199 $ 109,972 $ 909,310
827,816 1,055,144
418,775 1,241,688
427,109 629,333
1,690,100
16,199 1,783,672 5,525,575
97,658 163,085 532,945
858,449 2,951,604
139,626 2,087,349
5,000 1,728,570
534,789 534,789
6,137,420 428,767 6,566,187
1,399,190
1,474,801 1,474,802
18,934 734,692 1,359,947
6,254,012 4,339,209 18,635,383
$ 6,270,211 $ 6,122,881 $ 24,160,958
25
CITY OF MILLBRAE
Reconciliation of the
GOVERNMENTAL FUNDS -- BALANCE SHEET
STATEMENT OF NET ASSETS
JUNE 30, 2006
Total fund balances reported on the Governmental Funds Balance Sheet $ 18,635,383
Amounts reported for Governmental Activities in the Statement of Net Assets
are different from those reported in the Governmental Funds above because of the following:
CAPITAL ASSETS
Capital assets used in Governmental Activities are not current assets or financial resources and
therefore are not reported in the Governmental Funds 23,315,670
ALLOCATION OF INTERNAL SERVICE FUND NET ASSETS
Internal service funds are not governmental funds. However, they are used by management to
charge the costs of certain activities, such as insurance and central services and maintenance
to individual governmental funds. The net current assets of the Internal Service Funds are therefore
included in Governmental Activities in the following line items in the Statement of Net Assets.
Cash and investments 988,505
Internal balances 31,228
Capital assets 699,980
Accounts payable ( 14,863)
Compensated absences ( 15,576)
Accrued self- insurance ( 627,449)
ACCRUAL OF NON- CURRENT REVENUES AND EXPENSES
Revenues which are deferred on the Fund Balance Sheets because they are not available currently
are taken into revenue in the Statement of Activities. 427,109
LONG- TERM ASSETS AND LIABILITIES
The assets and liabilities below are not due and payable in the current period and therefore are not
reported in the Funds:
Prepaid pension obligation 10,075,632
Long- term debt ( 36,664,830)
Compensated absences ( 2,029,242)
Interest payable ( 444,849)
NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 14,376,698
See accompanying notes to financial statements
27
CITY OF MILLBRAE
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
FOR THE YEAR ENDED JUNE 30, 2006
Millbrae
Station Area
Redevelopment Redevelopment Developer
Agency Agency Fee - Capital
Special Revenue Debt Service Capital Projects
General Fund Fund Fund
REVENUES
Property tax $ 5,894,748 $ 624,721 $ 2,498,887
Sales tax 2,248,317
Transient occupancy tax 2,603,820
Other taxes 1,311,689
Licenses and permits 435,583
Charges for services 664,571 $ 25,000
Fines and forfeitures 209,764
Use of money and property 382,606 7,735 60,660 54,841
Grants and intergovernmental 294,917
Miscellaneous 84,656 12,511
Total Revenues 14,130,671 644,967 2,559,547 79,841
EXPENDITURES
Current:
General government 1,475,679
Public safety 8,290,749
Highways and streets 950,648
Culture and recreation 913,209
Community development 543,199 91,762 531,935
Payments to property tax pass throughs ( Note 1F) 1,284,484
Capital outlay 221,659
Debt service:
Principal 607,350 50,000
Interest and fiscal charges 1,861 476,288
Total Expenditures 13,004,354 91,762 1,810,772 531,935
EXCESS ( DEFICIENCY) OF REVENUES
OVER EXPENDITURES 1,126,317 553,205 748,775 ( 452,094)
OTHER FINANCING SOURCES ( USES)
Issuance of long- term debt ( Note 7) 188,074
Transfers in ( Note 4C) 636,703 115,423
Transfers ( out) ( Note 4C) ( 799,317) ( 115,423) ( 424,742)
Total Other Financing Sources ( Uses) 25,460 ( 115,423) ( 309,319)
NET CHANGE IN FUND BALANCES 1,151,777 437,782 439,456 ( 452,094)
BEGINNING FUND BALANCES 1,552,965 2,200,162 1,653,699 1,058,415
ENDING FUND BALANCES $ 2,704,742 $ 2,637,944 $ 2,093,155 $ 606,321
See accompanying notes to financial statements
28
Redevelopment
Agency Other Total
Capital Projects Governmental Governmental
Fund Funds Funds
$ 625,085 $ 9,643,441
2,248,317
2,603,820
383,825 1,695,514
39,029 474,612
1,150,763 1,840,334
149,018 358,782
$ 83,111 174,208 763,161
834,343 1,129,260
132,754 229,921
83,111 3,489,025 20,987,162
1,475,679
123,423 8,414,172
479,983 1,430,631
1,143,991 2,057,200
741,294 198,331 2,106,521
1,284,484
6,386 435,159 663,204
150,000 807,350
752,885 1,231,034
747,680 3,283,772 19,470,275
( 664,569) 205,253 1,516,887
188,074
424,742 1,519,895 2,696,763
( 351,000) ( 541,964) ( 2,232,446)
73,742 977,931 652,391
( 590,827) 1,183,184 2,169,278
6,844,839 3,156,025 16,466,105
$ 6,254,012 $ 4,339,209 $ 18,635,383
29
CITY OF MILLBRAE
Reconciliation of the
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS
with the
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2006
The schedule below reconciles the Net Changes in Fund Balances reported on the Governmental Funds Statement of
Revenues, Expenditures and Changes in Fund Balance, which measures only changes in current assets and current
liabilities on the modified accrual basis, with the Change in Net Assets of Governmental Activities reported in the
Statement of Activities, which is prepared on the full accrual basis.
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS $ 2,169,278
Amounts reported for governmental activities in the Statement of Activities
are different because of the following:
CAPITAL ASSETS TRANSACTIONS
Governmental Funds report capital outlays as expenditures. However,
in the Statement of Activities the cost of those assets is capitalized and allocated over
their estimated useful lives and reported as depreciation expense.
The capital outlay and other capitalized expenditures are therefore added back to fund balance 1,513,170
Depreciation expense is deducted from the fund balance
( Depreciation expense is net of internal service fund depreciation
of $ 136,588 which has already been allocated to serviced funds) ( 629,793)
LONG- TERM DEBT PROCEEDS AND PAYMENTS
Bond proceeds provide current financial resources to governmental funds, but
issuing debt increases long- term liabilities in the Statement of Net Assets.
Repayment of bond principal is an expenditure in the governmental funds, but
in the Statement of Net Assets the repayment reduces long- term liabilities.
Proceeds from the issuance of debt are deducted from fund balance ( 188,074)
Repayment and forgiveness of debt principal are added back to fund balance 1,894,208
Interest expense are deducted from fund balance ( 444,849)
ACCRUAL OF NON- CURRENT ITEMS
The amounts below included in the Statement of Activities do not provide or ( require) the use of
current financial resources and therefore are not reported as revenue or expenditures in
governmental funds ( net change):
Internal balances ( 5,198)
Deferred revenue 427,109
Compensated absences ( 111,003)
Unpaid interest added to long- term debt ( 1,246,816)
Amortization of prepaid pension obligation ( 620,368)
ALLOCATION OF INTERNAL SERVICE FUND ACTIVITY
Internal Service Funds are used by management to charge the costs of certain activities,
such as equipment acquisition, maintenance, and insurance to individual funds.
The portion of the net revenue ( expense) of these Internal Service Funds arising out
of their transactions with governmental funds is reported with governmental activities,
because they service those activities.
Change in Net Assets - All Internal Service Funds ( 421,023)
CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 2,336,641
See accompanying notes to financial statements
30
MAJOR PROPRIETARY FUNDS
Proprietary funds account for City operations financed and operated in a manner similar to a private
business enterprise. The intent of the City is that the cost of providing goods and services be financed
primarily through user charges.
The City has identified the funds below as major proprietary funds in fiscal 2006.
MUNICIPAL WATER SYSTEM FUND
To account for activities related to providing water service to the Millbrae residents.
MUNICIPAL WASTE WATER TREATMENT FACILITY FUND
To account for services of the collection, treatment and administration of the City’s sanitation system.
STORM DRAIN FUND
To account for the resources and costs of maintenance and improvements of the City’s storm drains.
31
CITY OF MILLBRAE
PROPRIETARY FUNDS
STATEMENT OF NET ASSETS
JUNE 30, 2006
Business- type Activities- Enterprise Funds Governmental
Municipal Municipal Waste Activities-
Water Water Treatment Storm Internal Service
System Facility Drain Totals Funds
ASSETS
Current Assets:
Cash and investments ( Note 3) $ 1,199,843 $ 2,184,610 $ 3,384,453 $ 988,505
Cash with fiscal agent ( Note 3) 965,733 965,733
Receivables:
Accounts - net 817,218 963,200 1,780,418
Due from other funds ( Note 4A) 254,175 254,175
Due from other governmental agencies 34,219 $ 18,707 52,926
Total Current Assets 2,271,236 4,147,762 18,707 6,437,705 988,505
Total Noncurrent Assets:
Advances to other funds ( Note 4B) 650,000 650,000
Depreciable capital assets, net ( Note 6) 5,718,102 11,738,915 1,138,913 18,595,930 699,980
Total Assets 8,639,338 15,886,677 1,157,620 25,683,635 1,688,485
LIABILITIES
Current Liabilities:
Accounts payable 265,127 835,579 1,531 1,102,237 14,863
Interest payable 49,764 49,764
Deposits 203,536 17,510 11,533 232,579
Due to other funds ( Note 4A) 1,591,479 95,625 1,687,104
Compensated absences ( Note 1G) 29,545 70,163 647 100,355
Long- term debt due within one year ( Note 7) 209,830 209,830
Total Current Liabilities 498,208 2,774,325 109,336 3,381,869 14,863
Noncurrent Liabilities:
Compensated absences ( Note 1G) 22,233 111,656 8,662 142,551 15,576
Accrued self- insurance ( Note 11) 627,449
Long- term debt ( Note 7)
Due in more than one year 6,044,588 6,044,588
Total Liabilities 520,441 8,930,569 117,998 9,569,008 657,888
NET ASSETS ( Note 8)
Invested in capital assets, net of related debt 5,718,102 9,818,951 1,138,913 16,675,966 699,980
Unrestricted 2,400,795 ( 2,862,843) ( 99,291) ( 561,339) 330,617
Total Net Assets $ 8,118,897 $ 6,956,108 $ 1,039,622 16,114,627 $ 1,030,597
Some amounts reported for business- type activities in the Statement of Net Assets are different
because certain internal service fund assets and liabilities are included with business- type activities. ( 31,228)
Net assets business- type activities $ 16,083,399
See accompanying notes to financial statements
32
CITY OF MILLBRAE
PROPRIETARY FUNDS
STATEMENT OF REVENUE, EXPENSES
AND CHANGES IN FUND NET ASSETS
FOR THE YEAR ENDED JUNE 30, 2006
Business- type Activities- Enterprise Funds Governmental
Municipal Municipal Waste Activities-
Water Water Treatment Storm Internal Service
System Facility Drain Totals Funds
OPERATING REVENUES
Water sales $ 3,852,907 $ 3,852,907
Sewer service fees $ 4,530,967 4,530,967
Equipment rental $ 522,138
Interdepartmental charges 981,771
Storm drain fees $ 220,445 220,445
Miscellaneous 75,120 48,650 196,059 319,829 14,341
Total Operating Revenues 3,928,027 4,579,617 416,504 8,924,148 1,518,250
OPERATING EXPENSES
Personnel services 1,114,723 2,319,420 180,031 3,614,174 451,157
Contractual services 366,579 838,846 104,729 1,310,154 140,378
Materials, supplies and other services 385,221 480,463 17,878 883,562 200,889
Water purchases 1,431,168 1,431,168
Depreciation 166,564 515,952 41,364 723,880 136,588
Utilities 4,718 615 5,333
Insurance premiums and claims 555,408
Total Operating Expenses 3,468,973 4,154,681 344,617 7,968,271 1,484,420
Operating Income ( Loss) 459,054 424,936 71,887 955,877 33,830
NONOPERATING REVENUES ( EXPENSES)
Loss on disposal of capital assets
Interest revenue 58,982 120,497 17,334 196,813 28,236
Interest expense ( 310,012) ( 310,012)
Total Nonoperating Revenues ( Expenses) 58,982 ( 189,515) 17,334 ( 113,199) 28,236
Income ( Loss) Before Transfers 518,036 235,421 89,221 842,678 62,066
Transfers in ( Note 4C) 50,000 50,000 85,683
Transfers ( out) ( Note 4C) ( 600,000)
Net transfers 50,000 50,000 ( 514,317)
Change in net assets 518,036 235,421 139,221 892,678 ( 452,251)
BEGINNING NET ASSETS 7,600,861 6,720,687 900,401 1,482,848
ENDING NET ASSETS $ 8,118,897 $ 6,956,108 $ 1,039,622 $ 1,030,597
Some amounts reported for business- type activities in the Statement of Activities are different because a
portion of the net income of certain internal service funds is reported with the business- type activities ( 26,030)
which those funds service
Change in net assets of business- type activities $ 866,648
See accompanying notes to financial statements
33
CITY OF MILLBRAE
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2006
Business- type Activities- Enterprise Funds
Governmental
Municipal Municipal Waste Activities-
Water Water Treatment Storm Internal Service
System Facility Drain Totals Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 3,862,970 $ 4,501,577 $ 401,277 $ 8,765,824 $ 1,522,336
Payments to customers ( 697) ( 185,541) ( 186,238)
Payments to suppliers ( 2,263,063) ( 563,823) ( 132,800) ( 2,959,686) ( 358,806)
Payments to employees ( 1,098,128) ( 2,311,678) ( 182,792) ( 3,592,598) ( 451,146)
Claims paid ( 900,013)
Cash Flows from Operating Activities 501,779 1,625,379 ( 99,856) 2,027,302 ( 187,629)
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Interfund payments ( 254,175) ( 34,219) ( 50,000) ( 338,394)
Interfund receipts 1,591,479 95,625 1,687,104
Transfers in 50,000 50,000 85,683
Transfers ( out) ( 600,000)
Cash Flows from Noncapital Financing Activities ( 254,175) 1,557,260 95,625 1,398,710 ( 514,317)
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Acquisition of capital assets ( 744,377) ( 5,064,511) ( 204,854) ( 6,013,742) ( 269,553)
Principal payments on capital debt ( 198,531) ( 198,531)
Interest paid ( 311,597) ( 311,597)
Cash Flows from Capital and
Related Financing Activities ( 744,377) ( 5,574,639) ( 204,854) ( 6,523,870) ( 269,553)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest 58,982 120,497 17,334 196,813 28,236
Cash Flows from Investing Activities 58,982 120,497 17,334 196,813 28,236
Net Cash Flows ( 437,791) ( 2,271,503) ( 191,751) ( 2,901,045) ( 943,263)
Cash and investments at beginning of period 1,637,634 5,421,846 191,751 7,251,231 1,931,768
Cash and investments at end of period $ 1,199,843 $ 3,150,343 $ 4,350,186 $ 988,505
Reconciliation of Operating Income ( Loss) to Cash Flows
from Operating Activities:
Operating income ( loss) $ 459,054 $ 424,936 $ 71,887 $ 955,877 $ 33,830
Adjustments to reconcile operating income ( Loss)
to cash flows from operating activities:
Depreciation 166,564 515,952 41,364 723,880 136,588
Change in assets and liabilities:
Receivables, net ( 102,404) ( 78,040) ( 180,444) 4,086
Due from other governmental agencies ( 15,227) ( 15,227)
Accounts payable and other accrued expenses ( 75,377) 755,486 ( 9,578) 670,531 ( 17,539)
Compensated absences 16,595 7,742 ( 2,761) 21,576 ( 344,594)
Refundable deposits 37,347 ( 697) ( 185,541) ( 148,891)
Cash Flows from Operating Activities $ 501,779 $ 1,625,379 ($ 99,856) $ 2,027,302 ($ 187,629)
See accompanying notes to financial statements
34
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City of Millbrae was incorporated as a general law city in 1948. The City operates under the
Council- Administrator form of government and provides the following services: public safety
( police and fire), highways and streets, sewer, water, recreation, public improvements, planning and
zoning, building inspections, general administration services, and redevelopment.
The financial statements and accounting policies of the City conform with generally accepted
accounting principles applicable to governments. The Governmental Accounting Standards Board
( GASB) is the accepted standard- setting body for establishing governmental accounting and
financial reporting principles. Significant accounting policies are summarized below:
A. Reporting Entity
The financial statements of the City of Millbrae include the financial activities of the City and the
Millbrae Redevelopment Agency.
The Millbrae Redevelopment Agency is a separate government entity created in 1988 under the
provisions of the Community Redevelopment Law ( California Health and Safety Code) to assist in
revitalizing of areas within the City of Millbrae which are determined to be in a declining
condition. The Agency is controlled by the City and has the same governing board as the City,
which also performs all accounting and administrative functions for the Agency. The
Redevelopment Agency’s financial activities have been aggregated and merged ( termed “ blended”)
with those of the City in the accompanying financial statements. Specifically they are included the
Redevelopment Agency Housing Special Revenue Fund, the Redevelopment Agency Capital
Project Fund and the Redevelopment Agency Debt Service Fund.
Financial statements for the Agency may be obtained from the City of Millbrae at 621 Magnolia
Avenue, Millbrae, California, 94030.
B. Basis of Presentation
The City’s Basic Financial Statements are prepared in conformity with accounting principles
generally accepted in the United States of America. The Government Accounting Standards
Board is the acknowledged standard setting body for establishing accounting and financial
reporting standards followed by governmental entities in the U. S. A.
These Statements require that the financial statements described below be presented.
Government- wide Statements: The Statement of Net Assets and the Statement of Activities
display information about the primary government ( the City) and its component units. These
statements include the financial activities of the overall City government, except for fiduciary
activities. 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.
Governmental activities generally are financed through taxes, intergovernmental revenues, and
other nonexchange transactions. Business- type activities are financed in whole or in part by fees
charged to external parties.
35
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( Continued)
The Statement of Activities presents a comparison between direct expenses and program
revenues for each segment of the business- type activities of the City and for each function of the
City’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 ( a) charges paid by the recipients of goods or services offered by the programs,
( b) grants and contributions that are restricted to meeting the operational needs of a particular
program and ( c) fees, grants and contributions that are restricted to financing the acquisition or
construction of capital assets. Revenues that are not classified as program revenues, including all
taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the City's
funds, including blended component units. Separate statements for each fund category—
governmental and proprietary — are presented. The emphasis of fund financial statements is on
major individual governmental and enterprise funds, each of which is displayed in a separate
column. All remaining governmental and enterprise funds are aggregated and reported as
nonmajor funds.
Proprietary fund operating revenues, such as charges for services, result from exchange
transactions associated with the principal activity of the fund. Exchange transactions are those in
which each party receives and gives up essentially equal values. Nonoperating revenues, such as
subsidies and investment earnings, result from nonexchange transactions or ancillary activities.
C. Major Funds
GASB Statement 34 defines major funds and requires that the City’s major governmental and
business- type funds be identified and presented separately in the fund financial statements. All
other funds, called non- major funds, are combined and reported in a single column, regardless of
their fund- type.
Major funds are defined as funds that have either assets, liabilities, revenues or
expenditures/ expenses equal to ten percent of their fund- type total and five percent of the grand
total. The General Fund is always a major fund. The City may also select other funds it believes
should be presented as major funds.
The City reported the following major governmental funds in the accompanying financial
statements:
GENERAL FUND - The General Fund is established to account for the revenues and
expenditures to carry out basic governmental activities of the City such as general government,
public safety, highway and street, culture and recreation, and community development. This fund
accounts for all financial transactions not accounted for in the other funds.
REDEVELOPMENT AGENCY SPECIAL REVENUE FUND- To account for property tax
increments received by the Millbrae Redevelopment Agency to use for Low and Moderate
Income Housing Programs.
MILLBRAE STATION AREA DEVELOPER FEE – CAPITAL PROJECTS FUND- To
account for the fees collected from the developers for the operation of the Millbrae Station Area
development project.
36
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( Continued)
REDEVELOPMENT AGENCY DEBT SERVICE FUND - To account for the accumulation
of resources for payment of principal and interest on Millbrae Redevelopment Agency debt. The
Agency receives revenues from property tax increments.
REDEVELOPMENT AGENCY CAPITAL PROJECTS FUND - To account for the Millbrae
Redevelopment Agency’s resources for administrative costs, capital projects and long- term debt
obligation.
The City reported all its enterprise funds as major funds in the accompanying financial
statements:
MUNICIPAL WATER SYSTEM FUND - To account for activities related to providing water
service to the Millbrae residents.
MUNICIPAL WASTE WATER TREATMENT FACILITY FUND - To account for services
of the collection, treatment and administration of the City’s sanitation system
STORM DRAIN FUND - To account for the resources and costs of maintenance and
improvements of the City’s storm drains
The City also reports the following fund types:
Internal Service Funds. The funds account for garage services, workers’ compensation, general
liability and unemployment insurance; all of which are provided to other departments on a cost-reimbursement
basis.
D. Basis of Accounting
The government- wide and proprietary fund financial statements are reported using the economic
resources measurement focus and the full 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.
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. The City considers all revenues reported in the governmental funds to
be available if the revenues are collected within sixty days after year- end. Expenditures are
recorded when the related fund liability is incurred, except for principal and interest on general
long- term debt, claims and judgments, and compensated absences, which are recognized as
expenditures to the extent they have matured. Governmental capital asset acquisitions are
reported as expenditures in governmental funds. Proceeds of governmental long- term debt and
acquisitions under capital leases are reported as other financing sources.
Those revenues susceptible to accrual are property, sales, transient occupancy and franchise
taxes, special assessments, licenses for services and interest revenue. Fines, permits, and charges
for services are not susceptible to accrual because they are not measurable until received in cash.
37
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( Continued)
Non- exchange transactions, in which the City gives or receives value without directly receiving or
giving equal value in exchange, include taxes, grants, entitlements, and donations. On the accrual
basis, revenue from taxes is recognized in the fiscal year for which the taxes are levied or assessed.
Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all
eligibility requirements have been satisfied.
The City may fund programs with a combination of cost- reimbursement grants, categorical block
grants, and general revenues. Thus, both restricted and unrestricted net assets may be available to
finance program expenditures. The City’s policy is to first apply restricted grant resources to such
programs, followed by general revenues if necessary.
Certain indirect costs are included in program expenses reported for individual functions and
activities.
The City follows statements and interpretations of the Financial Accounting Standards Board and
its predecessors that were issued on or before November 30, 1989, in accounting for its business-type
activities, unless they conflict with Government Accounting Standards Board
pronouncements.
E. Revenue Recognition for Water and Sewer Enterprise Funds
Revenues are recognized based on cycle billings rendered to customers. Revenues for services
provided but not billed at the end of a fiscal period are accrued.
F. Property Tax
State Constitution Article 13 provides for a maximum general property tax rate statewide of $ 1.00
per $ 100 of assessed value. At the time of transfer of ownership, assessed value is calculated at
100% of market value as defined by the above- referenced Article 13; otherwise assessed value is
calculated as the lesser of 100% of market value or 2% over the prior year assessed value. The
State Legislature has determined the method of distribution of receipts from a $ 1.00 tax levy among
the counties, cities, school districts and other districts. Counties, cities and school districts may
levy such additional tax rate as is necessary to provide for voter- approved debt.
The County of San Mateo assesses properties and bills for and collects property taxes on behalf of
the City on the schedule that follows:
Secured Unsecured
Valuation Dates March 1 March 1
Lien/ Levy Dates July 1 March 1
Due Dates 50% on November 1 August 31
50% on February 1
Delinquent as of December 10 August 31
April 10
The term “ unsecured” refers to taxes on personal property not secured by liens on real property.
38
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( Continued)
Property tax revenues are recognized in the fiscal year, for which the taxes have been levied,
provided they become available. Available means due, or past- due and receivable within the
current period and collected within the current period or expected to be collected soon enough
thereafter to be used to pay liabilities of the current period, usually within 60- days of year end.
The Redevelopment Agency has property tax pass- through agreements executed in 1991 with the
County of San Mateo, San Mateo County Office of Education, San Mateo County Community
College District, San Mateo Union High School District, and Millbrae Elementary School District,
the taxing agencies in existence when the Plan Area was formed. Under these agreements, the
Agency passes through to these agencies a portion of the property tax increments it would
otherwise have received. Increments totaling $ 1,284,484 have been passed through to these
agencies during fiscal 2005- 2006.
G. Compensated Absences
Compensated absences comprise unpaid vacation and the vested portion of sick leave which are
accrued as earned. The City’s liability for compensated absences is recorded in various
Governmental funds or Proprietary funds as appropriate. The liability for compensated absences
is determined annually. For all governmental funds, amounts expected to be permanently
liquidated are recorded as fund liabilities; the long- term portion is recorded in the Statement of
Net Assets.
The changes of the compensated absences were as follows:
Governmental
Activities Business- Type Total
Beginning Balance $ 1,933,804 $ 221,330 $ 2,155,134
Additions 196,941 32,019 228,960
Payments ( 85,927) ( 10,443) ( 96,370)
Ending Balance $ 2,044,818 $ 242,906 $ 2,287,724
Current Portion $ 139,727 $ 100,355 $ 240,082
Compensated absences are liquidated by the fund that has recorded the liability. The long- term
portion of governmental activities compensated absences is liquidated primarily by the General
Fund.
39
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 2 - BUDGETS AND BUDGETARY ACCOUNTING
A. Budgeting Procedures
In even numbered years, the City Manager submits to the City Council a proposed biennial
operating budget for the ensuing two fiscal years. The operating budget includes proposed
expenditures and the means of financing them and is subjected to public hearings where comments
are obtained for consideration. Council adopts the budget through passage of a budget resolution at
which time the proposed expenditures become appropriations to the various City departments. The
City Council controls the budget at the fund level. The budget is effective the following July 1 and
may be amended by subsequent Council resolutions. The City Manager is authorized to transfer
appropriations between line items within any department. Inter- fund transfers in excess of $ 20,000
must be approved by the City Council. Expenditures may not exceed appropriations at the fund
level. All appropriations lapse at year end. Supplemental appropriations were adopted by City
Council and have been included in the budget versus actual statements.
Budgets are adopted on a basis consistent with generally accepted accounting principles ( GAAP)
for all funds except for Capital Project Funds ( which are budgeted on project length basis),
Enterprise Funds, Hillcrest Slide Maintenance Special Revenue Fund, Parking In- Lieu Special
Revenue Fund, Sister City Trust Special Revenue Fund and Fire Facility Bonds Debt Service Fund.
B. Encumbrances
The City uses an encumbrance accounting system under which purchase orders, contracts and other
commitments for the expenditure of moneys are recorded in order to reserve that portion of the
applicable appropriation. Encumbrance accounting is employed as an extension of formal
budgetary integration in all budgeted funds. Encumbrances outstanding at year end are reported as
reservations of fund balances since they do not constitute expenditures or liabilities and are
reappropriated in the following year. Unexpended appropriations lapse at year end and must be
reappropriated in the following year.
C. Excess of Expenditures over Appropriations
During fiscal 2006, the following funds incurred expenditures in excess of budget.
Amount in Excess
Fund/ Department of Appropriations
Library Bond Debt Service Fund $ 2,155
Redevelopment Agency Debt Service Fund 8,421
40
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 3 - CASH AND INVESTMENTS
The City invests all funds, except cash with fiscal agents, in investment pools. The goal is to invest
at the maximum yield, consistent with safety and liquidity, while individual funds can process
payments for expenditures at any time. The City’s investments are carried at fair value, as required
by generally accepted accounting principles. The City adjusts the carrying value of its investments
to reflect their fair value at each fiscal year end, and it includes the effects of these adjustments in
income for that fiscal year.
The City’s cash and investments consist of the following at June 30, 2006:
Cash and Investments
Available for
Operations
With Fiscal
Agents Total
Investments:
U. S. Government Agency Securities $ 99,938 $ 848,518 $ 948,456
Local Agency Investment Fund 10,586,641 8 82,521 11,469,162
San Mateo County Investment Fund 9 ,418,875 9,418,875
Money Market Funds 1 00,828 1,711,730 1,812,558
Mutual Fund 189,399 189,399
Petty Cash 1 ,500 1,500
Cash in banks and on hand ( 329,423) ( 329,423)
Total cash and investments $ 19,878,359 $ 3,632,168 $ 23,510,527
The City does not allocate investments by fund. Each proprietary fund’s portion of Cash and
Investments Available for Operations is in substance a demand deposit available to finance
operations, and is considered a cash equivalent in preparing the statement of cash flows.
A. Authorized Investments by the City
The City’s Investment Policy and the California Government Code allow the City to invest in the
following, provided the credit ratings are acceptable of the issuers are acceptable to the City. The
following also identifies certain provisions of the City and California Government Code that
address interest rate risk, credit risk, and concentration of credit risk. This does not address the
City’s investments of debt proceeds held by fiscal agents that are governed by the provisions of
debt agreements of the City, rather than the general provisions of the California Government
Code or the Entity’s investment policy.
Maximum Maximum
Maximum Minimum Allowed in Investment in
Authorized Investment Type Maturity Credit Quality Portfolio One Issuer
California Local Agency Investment Fund N/ A N/ A $ 15 million/ account None
San Mateo County Pool N/ A N/ A None None
U. S. Treasury Obligations 5 years N/ A None None
U. S. Government Agency Obligations 5 years N/ A None None
Bankers' Acceptances 180 days N/ A 40% 30%
Collateralized Certificates of Deposit
with Banks or Savings & Loans 2 years AA 30% None
Negotiable Certificates of Deposit 2 years N/ A 30% None
Commercial Paper 270 days A1 25% 10%
Government Securities Fund 2 years N/ A None None
Repurchase Agreements 30 days N/ A None None
Money Market Funds N/ A N/ A None None
41
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 3 - CASH AND INVESTMENTS ( Continued)
The City did not enter into any reverse repurchase agreements during the year ended June 30, 2006.
B. Authorized Investments by Debt Agreements
The City must maintain required amounts of cash and investments with trustees or fiscal agents
under the terms of certain debt issues. These funds are unexpended bond proceeds or are pledged
reserves to be used if the City fails to meet its obligations under these debt issues. The California
Government Code requires these funds to be invested in accordance with City ordinances, bond
indentures or State statutes. The following identifies the investment types that are authorized for
investments held by fiscal agents. The table also identifies certain provisions of these debt
agreements:
Maximum Minimum
Authorized Investment Type Maturity Credit Quality
Local Agency Municipal Bonds N/ A
Two highest
rating category
U. S. Treasury Obligations N/ A N/ A
State of California Obligations N/ A A2/ A
California Local Agency Obligations N/ A N/ A
U. S. Agency Securities N/ A N/ A
Bankers' Acceptances 1 year A1
Commercial Paper 270 days A1
Short- Term Certificates of Deposit 1 year A- 1
Repurchase Agreements 30 days A
Money Market Mutual Funds N/ A AA- M
Collateralized Bank Deposits N/ A N/ A
California Local Agency Investment Fund N/ A N/ A
Unsecured CD's, deposit accounts, time
deposits, bankers acceptances 30 days A- 1
Special Revenue Bonds N/ A AA
Prefunded Municipal Obligations N/ A AAA
FDIC insured deposit N/ A N/ A
There are no restrictions on the maximum amount invested in each security type or a maximum that
can be invested in any one issuer.
As of June 30, 2006, the City had $ 189,399 invested in a mutual fund. The mutual fund’s
investments included bankers’ acceptances of U. S. branches of foreign banks, short- term corporate
notes and bonds, master demand notes, short- term fund agreements, variable and floating rate
securities, private placements investments, when- issued or delayed- delivery securities and
Eurodollar time deposits. Subsequent to June 30, 2006, the City had drawn down on the mutual
fund and as of September 29, 2006, the fair value of the mutual fund was $ 5,035.
C. Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value
of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity
of its fair value to changes in market interest rates.
42
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 3 - CASH AND INVESTMENTS ( Continued)
Information about the sensitivity of the fair values of the City’s investments to market interest
rate fluctuations is provided by the following table that shows the distribution to the City’s
investments by maturity:
12 Months 13 to 24
or less Months Total
U. S. Government Agency Securities $ 416,738 $ 531,718 $ 948,456
Local Agency Investment Fund 11,469,162 11,469,162
San Mateo County Investment Fund 9,418,875 9,418,875
Money Market Funds 1,812,558 1,812,558
Mutual Fund 189,399 189,399
Petty Cash 1,500 1,500
City- wide cash and investment pool ( 329,423) ( 329,423)
Total Cash and Investments $ 22,978,809 $ 531,718 $ 23,510,527
D. Credit Risk
Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of
the investment. This is measured by the assignment of a rating by a nationally recognized
statistical rating organization. Presented below is the minimum rating required by the California
Government Code, the City’s investment policy, or debt agreements and the actual rating as of
June 30, 2006 for each investment type:
Investment Type AAA Total
U. S. Government Agency Securities $ 948,456 $ 948,456
Totals
Not rated:
Local Agency Investment Fund 11,469,162
San Mateo County Investment Fund 9,418,875
Money Market Funds 1,812,558
Mutual Fund 189,399
Petty Cash 1,500
Cash in banks and on hand ( 329,423)
Total Cash and Investments $ 23,510,527
E. Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository
financial institution, the City will not be able to recover its deposits or will not be able to recover
collateral securities that are in the possession of an outside party. Under California Government
Code Section 53651, depending on specific types of eligible securities, a bank must deposit
eligible securities posted as collateral with its Agent having a fair value of 105% to 150% of the
City’s cash on deposit. All of the City’s deposits are either insured by the Federal Depository
Insurance Corporation ( FDIC) or collateralized with pledged securities held in the trust
department of the financial institutions in the City’s name.
43
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 3 - CASH AND INVESTMENTS ( Continued)
The custodial credit risk for investments is the risk that, in the event of the failure of the
counterparty ( e. g. broker- dealer) to a transaction, the City will not be able to recover the value of
its investment or collateral securities that are in the possession of another party. The City’s
Investment Policy limits its exposure to custodial credit risk by requiring that all security
transactions entered into by the City, including collateral for repurchase agreements, be
conducted on a delivery- versus- payment basis. Securities are to be held by a third party
custodian.
F. Local Agency Investment Fund
The City is a voluntary participant in the Local Agency Investment Fund ( LAIF) that is regulated
by California Government Code Section 16429 under the oversight of the Treasurer of the State
of California. The City reports its investment in LAIF at the fair value amount provided by
LAIF. The balance available for withdrawal is based on the accounting records maintained by
LAIF, which are recorded on an amortized cost basis. Included in LAIF’s investment portfolio
are collateralized mortgage obligation, mortgage- backed securities, other asset- backed securities,
loans to certain state funds, and floating rate securities issued by federal agencies, government-sponsored
enterprises, and corporations. At June 30, 2006, these investments matured in an
average of 152 days.
G. San Mateo County Investment Fund
The City is a voluntary participant in the San Mateo County Investment Fund ( SMCIF) that is
regulated by California Government Code Section 53600 under the oversight of the treasurer of
the County of San Mateo. The City reports its investment in SMCIF at the fair value amount
provided by SMCIF. The balance available for withdrawal is based on the accounting records
maintained by SMCIF, which are recorded on an amortized cost basis. Included in SMCIF’s
investment portfolio are U. S. Treasury Notes, obligations issued by agencies of the U. S.
Government, LAIF, corporate notes, commercial paper, collateralized mortgage obligations,
mortgage- backed securities, other asset- backed securities, and floating rate securities issued by
federal agencies, government- sponsored enterprises, and corporations. At June 30, 2006, these
investments matured in an average of 1.3 years.
Money Market Funds are available for withdrawal on demand.
NOTE 4 - INTERFUND TRANSACTIONS
A. Current Interfund Balances
Current interfund balances arise in the normal course of business and are expected to be repaid
shortly after the end of the fiscal year. At June 30, 2006 interfund balances were as follows:
Receivable Fund Payable Fund Amount
General Fund Non- Major Governmental Funds $ 703,085
Millbrae Station Area Developer Fee
- Capital Projects Fund 227,320
Storm Drain Enterprise Fund 95,625
Redevelopment Agency Capital Projects Fund Municipal Wastewater Treatment Facility Fund 1,337,304
Non- Major Governmental Funds 124,739
Municipal Water System Enterprise Fund Municipal Wastewater Treatment Facility Fund 254,175
$ 2,742,248
44
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 4 - INTERFUND TRANSACTIONS ( Continued)
B. Advances ( Long- Term Interfund Receivable/ Payables)
The City has an agreement with the Millbrae Redevelopment Agency under which the City has
agreed to advance up to $ 3,000,000 to the Agency to be used to fund legal services, special reports,
public hearings, and general administrative expenditures of the Agency. Advances bear annual
interest at the higher of 6% or the rate interest is earned on the City’s investment in the Local
Agency Investment Fund. Advances from the General Fund and Municipal Water System
Enterprise Fund to the Redevelopment Agency $ 1,690,100 respectively, as of June 30, 2006. The
agreements do not specify a due date for repayment of advances.
At June 30, 2006 outstanding balances from the above advances were as follows:
Receivable Fund Payable Fund Amount
General Fund Redevelopment Agency Debt Service Fund $ 1,040,100
Municipal Water System Enterprise Fund Redevelopment Agency Debt Service Fund 650,000
$ 1,690,100
C. Transfers Between Funds
With Council approval, resources may be transferred from one City fund to another. Transfers
between funds during the fiscal year ended June 30, 2006 were as follows:
Fund Receiving Transfers Fund Making Transfers
Amount
Transferred
General Fund Non- Major Governmental Funds $ 36,703 E
General Liability Internal Service Fund 600,000 C
Non- Major Governmental Funds General Fund 663,634 A
Redevelopment Agency Capital Projects Fund 351,000 E
Non Major Governmental Funds 505,261 E
Storm Drain Enterprise Fund General Fund 50,000 C
Internal Service Funds General Fund 85,683 B
Redevelopment Agency Debt Service Fund Redevelopment Agency Special Revenue Fund 115,423 C
Redevelopment Agency Capital Projects Fund Redevelopment Agency Debt Service 424,742 D
Total Interfund Transfers $ 2,832,446
The reasons for these transfers are set forth below:
A To fund park and recreation activities and pay debt service costs
B To fund police vehicle maintenance and replacements
C To fund debt service payments
D To fund administrative expenditures
E To fund library maintenance costs, landscaping improvements and Central Park project
45
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 4 - INTERFUND TRANSACTIONS ( Continued)
D. Internal Balances
Internal balances are presented in the Entity- wide financial statements only. They represent the
net interfund receivables and payables remaining after the elimination of all such balances within
governmental and business- type activities.
NOTE 5 - LOANS RECEIVABLE
The Low and Moderate Income First Time Home Buyer Program was established to provide
mortgages for up to 20 employees of School Districts located within the City. In order to qualify
participants must be employees of these Districts and they must be home buyers in low and
moderate- income housing developments who do not qualify for a home purchase without down
payment assistance. These loans bear no interest nor require payments for the first ten years of
the loan or until the participant ceases employment with the District, which ever is earlier. After
that date the loans bear a negotiated interest rate and require monthly interest payments. The
loans are secured by second deeds of trust, require the principal balance to be paid at the end of
the thirty year term and must be repaid in full if the property is sold to a unqualified buyer. At
June 30, 2006, First Time Home Buyer Loans in the amount of $ 683,470 were outstanding.
NOTE 6 - CAPITAL ASSETS
All capital assets are valued at historical cost or 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. The City defines capital assets as those assets with an initial individual cost of
more than