CITY OF MILLBRAE
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED JUNE 30, 2005
Prepared by
FINANCE DIVISION,
DEPARTMENT OF GENERAL SERVICES
CITY OF MILLBRAE
Comprehensive Annual Financial Report
For the Year Ended June 30, 2005
TABLE OF CONTENTS
Page
INTRODUCTORY SECTION
Letter of Transmittal ............................................................................................................................... ....... i
Elected Officials, Commissions, Committees and Advisory Boards and Directory of City Officials ................ xi
Organization Chart.......................................................................................................................... ........... xiii
Our Values ............................................................................................................................... .................. xv
Our Purposes ............................................................................................................................... .............. xvi
GFOA Certificate of Achievement .............................................................................................................. xvii
CSMFO Certificate of Award ................................................................................................................... xviii
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 Balance......................................... 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, 2005
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:
Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual:
General Fund........................................................................................................................... 64
Redevelopment Agency Special Revenue Fund .......................................................................... 65
Notes to Required Supplemental Information....................................................................................... 66
Supplemental Information:
Major Governmental Funds Other Than the General Fund and Special Revenue Funds:
Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual:
Redevelopment Agency Debt Service Fund ................................................................................... 70
Non- major Governmental Funds:
Combining Balance Sheets ........................................................................................................... 76
Combining Statements of Revenues, Expenditures, and Changes
in Fund Balances ..................................................................................................................... 82
Combining Schedule of Revenues, Expenditures, and Changes
in Fund Balances- Budget and Actual....................................................................................... 88
CITY OF MILLBRAE
Comprehensive Annual Financial Report
For the Year Ended June 30, 2005
TABLE OF CONTENTS
Page
FINANCIAL SECTION ( Continued)
Internal Service Funds:
Combining Statement of Net Assets.............................................................................................. 96
Combining Statements of Revenues, Expenses and Changes in Fund Net Assets............................ 97
Combining Statements of Cash Flows........................................................................................... 98
STATISTICAL SECTION
General Governmental Revenues by Source - All Governmental Fund Types and Similar
Trust Funds - Last Ten Fiscal Years............................................................................................ 101
General Governmental Expenditures by Function - All Governmental Fund types and Similar
Trust Funds - Last Ten Fiscal Years............................................................................................ 102
General Governmental Tax Revenues All - Governmental Fund Types - Last Ten Fiscal Years .... 103
Property Tax Levies and Collections - Last Ten Fiscal Years....................................................... 104
Assessed Value of Property - Last Ten Fiscal Years .................................................................... 105
Property Tax Rates - Direct and Overlapping Governments -
Last Ten Fiscal Years ............................................................................................................ 106
Property Tax Dollar Breakdown.................................................................................................. 107
2004/ 2005 Top Ten Property Owners.......................................................................................... 108
Special Assessment Billings and Collections – Last Ten Fiscal Years........................................... 109
Computation of Legal Debt Margin ............................................................................................. 110
Schedule of Direct and Overlapping Bonded Debt........................................................................ 111
Ratio of Net General Obligation Bonded Debt to Assessed
Value and Net General Obligation Bonded Debt Per Capita -
Last Ten Fiscal Years ............................................................................................................ 112
Ratio of Annual Debt Service Expenditures for General
Bonded Debt to Total Governmental Fund Type Expenditures -
Last Ten Fiscal Years ............................................................................................................ 113
CITY OF MILLBRAE
Comprehensive Annual Financial Report
For the Year Ended June 30, 2005
TABLE OF CONTENTS
Page
STATISTICAL SECTION ( Continued)
Sewer Fund Revenue Bond Coverage - Sewer Authority – Last Ten Fiscal Years......................... 114
Demographic Statistics - Last Ten Fiscal Years .......................................................................... 115
Construction and Bank Deposits - Last Ten Fiscal Years ............................................................. 116
Use Category Summary............................................................................................................... 117
2004/ 05 Growth Summary by Agency......................................................................................... 118
2004 Top Property Taxpayers..................................................................................................... 119
Top 25 Sales Tax Providers ........................................................................................................ 120
Summary of Property Use by Category........................................................................................ 121
2004 Top Property Owner Summary........................................................................................... 122
Miscellaneous Statistics ............................................................................................................. 123
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: 20,464; Incorporated: January 14, 1948; San Mateo County Seat
Established: 1856; Registered Voters: 11,432 ( 1/ 98); 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
California's broad- based economic expansion continued in FY 2005. Employment grew at a good
pace, commercial construction continued to exceed last year's pace, and home sales held up well in
the face of rising prices and interest rates. Some key State- wide employment and real estate
economic facts are stated below:
n California has created jobs every month this year, at an average monthly rate of 20,400.
Another 17,200 were added in August.
n From August 2004 to August 2005, California payroll employment grew by 223,300, or 1.5
percent. Employment rose in nine out of 11 major industry sectors.
n The state's unemployment rate has improved steadily during the first eight months of 2005,
from 6.0 percent in December 2004 to 5.2 percent in August. However, the labor force
statistics have been uncharacteristically volatile since the Bureau of Labor Statistics adopted a
new local area methodology in February of this year. Civilian employment made extraordinary
jumps in February, April, and August. Estimated unemployment fell precipitously in March
and July.
n Even though home building slowed in August, this year is still on track to match the healthy
pace achieved in 2004. Residential building permits were issued at a seasonally adjusted,
annual rate of 212,000 units during the first eight months of 2005. This is slightly better than
the 210,000- unit pace set during the same months of 2004. Single- family construction picked
up enough over last year to more than compensate for a slight slowing in the multi- family
sector.
n Nonresidential construction
permitting slowed in August by
9 percent after a very strong
July. All building categories
slowed, but the steepest declines
were in the Industrial and Store
sectors. For the first eight
months of 2005 as a whole,
nonresidential construction was
up over 12 percent above the
same months of 2004.
n California home prices
continued to rise despite
somewhat softer sales. The
median price of existing single-family
homes sold in August
climbed to $ 568,890, a 20-
percent increase from a year
earlier, while the pace of home
sales slowed to an annual rate of
632,240 units.
n Home prices may have received a boost from the anticipation of rising mortgage rates.
Both long- term fixed and adjustable mortgage rates drifted higher in July and August, which
may have been taken as a signal of higher rates to come.
( Source: State of California Department of Finance)
San Mateo County Economy
The City of Millbrae is located in San Mateo County. San Mateo County is one of nine counties
in the San Francisco Bay Area and significantly contributing to the Bay Area economy. 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 723,000 persons. By the
year 2020, the county is projected to exceed 786,000 residents.
San Mateo County’s labor force declined by 5,900 ( 1.6 percent) in 2004 to 363,400; since 2000,
the labor force has cumulatively declined 8.7 percent or 34,800. San Mateo’s 2004
unemployment rate dropped to 5.0 percent from a high of 5.9 percent in 2003. Since 2000, San
Mateo County posted consistently lower rates than California.
Industry employment in San Mateo totaled 327,500 in 2004, down 1,900 from the previous year;
since 2000, the county’s industry employment has cumulatively decreased by 12.8 percent ( down
48,300). Industries recording the largest employment gains during the years 2000– 2004 included
educational and health services; other services; and leisure and hospitality. In educational and
health services, both major components recorded job gains: health care and social assistance ( up
1,600); and educational services ( up 700). Other services employment added 1,000 jobs in
membership associations and organizations, offsetting losses in repair and maintenance and
personal and laundry services. Leisure and hospitality gains concentrated in amusement, gambling,
and recreation ( up 400).
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. Future Hotel Tax growth is
projected at the rate of 3% to 5% annually. The hotel/ travel industry has the greatest impact on the
local economy and the City’s revenue base. Although Sales Tax had declined in previous years,
growth is now projected at the rate of 3%.
Property Tax increases are much stronger. General Fund Property Tax increased 7.24% in Fiscal
Year 2005 and is projected to increase 5% to 6% 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 $ 1.125 million annually in fire assessment revenue. 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
· Redevelopment Agency Bond Refinancing. The City Redevelopment Agency
refinanced its bonds at a lower interest rate, and at the same time took advantage of the increased
revenue stream coming into the Agency by increasing the bond amount to $ 8.6 million. The new
capital funding will facilitate new redevelopment projects.
· Asian Community Outreach. The City of Millbrae has taken a number of actions
to promote participation of the Asian population within the City with various community
affairs. Some specific actions include: meetings and development of plans to help bring
cultural programs to the City, and to disseminate information to the Asian Community about
city issues, share information about various programs of interest; assisted in promoting Bi-
Lingual Story time, Nan Hai Culture Event, Mr. Yin Piano Concert, World Journal Youth
Concert; translated and dispersed Press Release for Police Department, Millbrae Now
Meetings and Recreation Department Activity Guides; helped the Recreation Department
develop classes & rentals targeted to the Asian population, ( Educational Summer Camp, Line
Dancing, After School Classes, Chinese Harp); and staff is working on future special events –
Lunar New Year, Taste of Millbrae and an “ Art & Culture Event” to be held in October 2006.
· Millbrae NOW – 5- Year Financial Plan. The City of Millbrae held two well- publicized
community meetings soliciting public comment regarding projected financial shortfalls projected
within the next five years. Over 150 were in attendance. A presentation was made regarding the
City of Millbrae’s financial future and what alternatives were available. Those in attendance were
asked to indicate whether they wished for a continuance of current service levels, a modest
increase in service levels or a significant increase in service levels. The vast majority of those
attending supported a modest increase or significant increase. This selection was made with the
understanding that in addition to the renewal of the fire assessment which sunsets in four years,
another one to two million dollars is needed to fund these improvements.
· Successful Renewal of Solid Waste Service Agreement – Implementation of
Increased Franchise Fee. The City was able to increase the revenues projected for solid waste
franchise fees as part of its renegotiation and extension of the current solid waste collection
service agreement with South San Francisco Scavenger Company. At the same time, only modest
increases were implemented and small increases are forecast in the three- year agreement.
· New Police Chief Hired – Police Communications County Contract. The City of
Millbrae had shared the Fire Chief with the Police Department and by doing so, created a Public
Safety Director. This measure was seen as temporary until a longer term direction for the Police
Department was determined. The City Council considered various alternatives including
contracting with other cities and the county for police services. The Council approved a contract
with San Mateo County for the provision of police emergency communication services. This
contract will retain or improve current communication services levels and will provide $ 300,000
in annual savings in operating costs, as well as significant future capital improvements. It was
determined to retain police records services and other core police activities with the City’s own
workforce. The City hired a seasoned and capable Police Chief that will be shared between the
City of Millbrae and the City of Brisbane, where he has served as Police Chief for 18 years.
· Cogeneration Project. The City Council approved a major wastewater system
improvement with the construction of a 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.
· Wastewater Treatment Plant Renovation. The City’s wastewater collection system
and treatment plan will undergo extensive renovation starting 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.
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 departmental level within each fund. 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, 2005, 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 Administrator 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 an independent commercial insurance company 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, 2004. This
was the 10th 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 2004. These awards are the highest
awards given for government accounting and financial reporting achievements in the State of
California.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal 2005 is the third 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 2005 FINANCIAL HIGHLIGHTS
The economic decline experienced during the past few years appeared to be leveling off with signs of a
slow to moderate recovery. The City’s previously largest revenue source, Transient Occupancy Tax
( Hotel Tax) decreased by more than 50% and now showed a 3.26% growth in 2004- 05. Property Taxes
increased 52%. This huge increase mainly resulted from a $ 1.1 million of new Fire Assessment Tax and
a $ 1.1million of the Property Tax in Lieu of Vehicle License Fee. Due to a change in the method for
distribution of the Vehicle License Fee Adjustment Amount ( VLFAA) by the State of California in 2004-
05, the VLFAA was treated as property tax, instead of intergovernmental revenue. Regular property taxes
increased 12%. On the other hand, Sales Tax was $ 0.06 million lower than the prior year mainly due to a
week recovery and a change in distribution method for Sales Tax by the State of California. The State of
California legislature enacted new provisions that changed how Sales and Use Taxes were distributed
starting 2005. Under the new revenue ‘ swapping’ procedures – commonly referred to as the ‘ triple flip’,
began July 1, 2004. Since this time, the statewide base sales and use tax rate remained at 7.25%.
However, local governments’ portion was reduced to 0.75%, from the previous 1% of the local tax base.
The 0.25% of tax rate was then shifted to the State. In return the local governments were reimbursed with
a portion of the county Educational Revenue Augmentation Fund, which was set aside in the Sales and
Use Tax Compensation Fund. The actual 2005 reimbursements to local governments were lower due to a
timing difference. Although sales tax had declined in previous years, future growth is now projected at
the rate of 3%.
The fiscal turnaround of Millbrae began with the difficult expenditure cuts made over the past 3 fiscal
years. Certain revenue enhancements enacted in early this year and last year were realized in 2005. This
year the City of Millbrae received $ 1.108 million in fire assessment revenue, $ 355,747 from sale of the
VLF loan receivable, and a $ 94,175 increase in refuse franchise fee due to a related fee increase enacted
earlier this year. The net General Fund balance increased $ 1.1 million in 2005. Other financial highlights
of the year include the following:
· The City’s total net assets increased $ 0.3 million during Fiscal 2005. At June 30, 2005, net assets
totaled $ 27 million;
· Total City revenues, including program and general revenues, decreased to $ 26 million, while total
expenses increased to $ 26 million in fiscal 2005;
· Net assets in Governmental funds were $ 12 million, while net assets in business activities were $ 15
million;
· Governmental Program Revenues were $ 3 million;
· Governmental Program Expenses were $ 18.4 million in fiscal 2005;
· Revenues from Business- Type activities were $ 7.6 million in fiscal 2005;
· Expenses of Business- Type Activities were $ 7.7 million in fiscal 2005;
· General Fund revenues totaled $ 13.1 million and expenditures were $ 11.5 million, which represented
an increase of $ 0.2 million over the prior year amounts; and,
· General Fund balance was $ 1.6 million at the 2005 fiscal year end.
OVERVIEW OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT
This Comprehensive Annual Financial Report is 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) 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 comprise the City- wide Financial Statements and the Fund Financial
Statements; these two sets of financial statements provide two different views of the City’s financial
activities and financial position.
The City- wide Financial Statements provide a longer- term view of the City’s activities as a whole, and
comprise the Statement of Net Assets and the Statement of Activities. The Statement of Net Assets
provides information about the financial position of the City as a whole, including all its capital assets and
long- term liabilities on 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.
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.
Governmental Activities
Table 1
Governmental Net Assets at June 30, 2005
( in Millions)
Governmental Activities
2005 2004
Cash and investments $ 19 $ 18
Other assets 12 12
Capital assets 23 20
Total assets 54 50
Long- term debt outstanding 37 33
Other liabilities 5 5
Total liabilities 42 38
Net assets:
Invested in capital assets, net of debt 9 8
Restricted 12 13
Unrestricted ( 9) ( 9)
Total net assets $ 12 $ 12
The City’s net assets from governmental activities increased with a fraction of $ 0.2 million as June 30,
2005. 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 $ 1 million from the governmental activities. Although the
Library Project funds’ cash and investments decreased $ 4 million, the Redevelopment funds cash
increased $ 3.6 million mainly from the new 2005 Bonds Proceeds, the cash transfer from
Internal Service funds increased $ 1 million, and the rest increases were from Measure A, Gas
Taxes, Recreations Special Revenue, and General Fund.
· Other assets remained at the same level of $ 12 million as the prior year. The major component of
‘ other assets’ was $ 10.7 million of Pre- paid pension obligation. In 2003- 04 the City of Millbrae
participated and issued the $ 11.5 million of Pension Obligation Bonds. The bond proceeds were
used to pay off the City of Millbrae’s un- funded actuarial liability with the California Public
Employees Retirement System.
· The increase in Capital Assets mainly came from the new Library construction, which amounted
$ 3.4 million in 2004- 05.
· Long- Term Debt increased $ 3.5 million primarily from the new RDA Bonds debt net of the old
bonds. In 2004- 05 Millbrae Redevelopment Agency issued $ 8.6 million of new bonds and paid
off $ 5 million for the remaining outstanding amount for the old 1993 bonds.
· The aggregate amount of “ Other Liabilities” remained the same as last year with an outstanding
balance of $ 5 million at the year- end.
· Capital assets totaled $ 23 million. Of this amount, $ 8.8 million were invested funds net of related
debt.
· Restricted net assets totaled $ 12 million, which includes $ 0.2 million restricted for capital
projects, $ 2.5 million earmarked for debt service, $ 6 million set aside for redevelopment, and
$ 3.2 million restricted for special revenue programs.
· Unrestricted net assets had a deficit of $ 8.6 million primarily due to the long- term debt, thereby
not requiring the current assets to be liquidated.
Fiscal Year 2005 Government Activities
( See Table 2)
Sources of Revenues
Property taxes
46%
Operating
contribution and
grants
7%
Investment
income
4%
Other taxes
6%
Transient
occupancy tax
12%
Sales taxes
10%
Transfers
1%
Misc.
1%
Motor vehicle
in lieu
3%
Charges for
services
11%
Functional Expense
Interest on
long- term debt
8%
Culture and
Recreation
11%
Community
Develop.
17%
General
Government
8%
Public Safety
47%
Highway
and Streets
9%
As the Sources of Revenue Chart above shows, $ 8.5 million, or 46% of the City’s Fiscal 2005 revenue,
came from Property Taxes revenues. This year a $ 1.1 million of Property Taxes came from the new fire
assessment tax and $ 1.1 million from the Property Tax in Lieu of Vehicle License Fee ( the VLF), which
was resulted from a method change in distribution of the VLF adjustment amount by the State of
California. Sales Taxes and Transient Occupancy Tax accounted for $ 1.9 million and $ 2.3 million
respectively. The total general revenues of $ 15.3 million, accounted for 82% of the 2005 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 2005, the City added $ 3.1 million in governmental capital assets, as shown in detail at Table 6.
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
2005 2004
Expenses
General government $ 1.42 $ 1.34
Public Safety 8.83 8.99
Highway and Streets 1.63 1.75
Culture and Recreation 1.97 1.31
Community Development 3.10 2.60
Interest on long- term debt 1.48 1.64
Total Expenses $ 18.43 $ 17.63
Revenues
Program revenues:
Charges for services 2.04 3.64
Operating contributions and grants 1.33 1.27
Developmental impact fees and permits 0.0 0.21
Total program revenues 3.37 5.12
General revenues:
Taxes:
Property taxes 8.54 5.62
Sales taxes 1.88 1.94
Transient occupancy tax 2.28 2.21
Other taxes 1.17 1.02
Motor vehicle in lieu 0.49 0.98
Investment income 0.72 0.34
Miscellaneous 0.18 1.87
Gain on sale of capital assets 0.01 0.60
Total general revenues 15.27 14.58
Total revenues 18.64 19.70
Change in net assets $ 0.21 $ 2.07
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.
Table 3
Governmental Activities
( in Millions)
Net ( Expense) Revenue
From Services
2005 2004
General Government $ ( 1.3) $ ( 1.0)
Public Safety ( 8.0) ( 8.1)
Highway and Streets ( 0.4) ( 0.5)
Culture and Recreation ( 1.3) ( 0.5)
Community Development ( 2.6) ( 0.8)
Interest on Long- term Debt ( 1.5) ( 1.6)
Totals $ ( 15.1) $ ( 12.5)
· $ 8 million of program net expenses over revenues came from Public Safety. The 2004- 05 Public
Safety net deficit decreased $ 0.1 million from 03- 04. The expenditure savings of $ 0.15 million
was partially offset by a $ 0.04 million loss in revenues. The Police expenditures decreased $ 0.42
million mainly due to three Police Officers and one Lieutenant had been on worker’s
compensation, who were separated from Millbrae in early 2004- 05 and not replaced. The Fire
expenditures were up $ 0.26 million mainly due to increased overtime to cover Fire Fighters who
were on worker’s compensation.
· Highway and Streets net expenses over revenues decreased $ 0.07 million mainly because the
BART Neighborhood Improvement Project was completed in 03- 04.
· Culture and Recreation net expenses over revenues increased $ 0.8 million. This was a result of a
$ 0.1 million decrease in revenues and $ 0.7 million increase in expenditures. Charge for Services
was down $ 0.1 million primarily due to a one- time parks in lieu fee that was received in 03- 04.
Culture and Recreation expenses increased mainly due to transfers from Internal Service Funds, a
new Maintenance Worker hired, and the Senior Program Coordinator changed from part- time to
full- time status.
· Community Development net expenses over revenues increased $ 1.8 million primarily due to
$ 1.3 million decrease in revenue and $ 0.5 million increase in expenses. The revenue decrease
resulted from a reduction of $ 1.3 million in developer fees/ permits from the 03- 04 level. The
developer fees/ permits were one- time in nature and were collected in advance in 03- 04. The
expenses increased because $ 0.2 million payment for the Education Revenue Augmentation Fund
( ERAF) and a transfer of the various General Fund departmental costs for the Specific Area
projects and for the Library Project to the Community Development programs. The State of
California legislatures had required the redevelopment agencies to shift $ 250 million in property
tax revenues to the K- 12 schools and community colleges during 2004- 05 and 2005- 06 fiscal
years.
· The interest on long- term debt decreased due to amortization in the accrual of unpaid interest on
long- term debt.
Business- type Activities
Table 4
Business- Type Net Assets
( in Millions)
Business- Type Activities
2005 2004
Cash and investments $ 7.25 $ 1.78
Other current assets 1.60 1.71
Internal balances 0.59 1.67
Capital assets and other 13.31 12.26
Total assets $ 22.75 $ 17.42
Long- term debt outstanding 6.45 1.26
Other liabilities 1.09 0.99
Total liabilities 7.54 2.25
Net assets:
Invested in capital assets, net of debt 11.19 11.00
Unrestricted 4.03 4.17
Total net assets $ 15.22 $ 15.17
Net assets for Business- type Activities increased $ 0.05 million. Cash and Investments increased $ 5.5
million as a result of a $ 1.4 million revenue increase from the Water Fund, $ 4.1 million from Sanitation
Fund, and a decrease of $ 0.1 million from Storm Drain Fund. Water Fund cash increased mainly resulted
from $ 1.2 million inter- fund receivable payments received. Sanitation Fund cash increased due to a new
loan for the Co- Generation project borrowed, net with payoff for the old loan payoff and the first progress
payment for the project. Correspondingly the long- term debt outstanding increased $ 5.2 million. Inter-fund
balances decreased $ 1.1 million, mainly due to the $ 1.2 million of Water inter- fund payments
received. Capital assets increased $ 1 million because the first progress payment for the Co- Generation
Project was made.
Table 5
Changes in Business- Type Net Assets
( in Millions)
Business - Type - Activities
2005 2004
Net: Revenues from Business- type activities
Municipal Water System $ 0.13 $ 0.47
Waste Water Treatment Facility ( Sanitation) ( 0.15) 0.11
Storm Drain ( 0.10) ( 0.11)
Total Business- type Activities ($ 0.12) $ 0.47
The Business- Type net expenses over revenues increased $ 0.6 million. Water Fund revenues suffered a
loss in revenues close to $ 0.4 million in 2004- 05, while expenses decreased $ 0.03 million from a year
ago. The water sales and purchases decreased due to a reduction in consumption, resulting from a wetter
than usual spring and cooler summer. Sanitation Fund expenses increased $ 0.2 million primarily due to
two new Maintenance Workers hired and increased retirement benefit costs. The employer rate for the
Miscellaneous group retirement benefits increased to 8.534% from the 3.869% level in 03- 04. In order
for the City to implement the Sanitary Sewer Overflow ( SSO) requirements, two new Maintenance
Workers were hired in 2004- 05. The U. S. Environment Protection Agency ( EPA) proposed Capacity
Management and Operations Maintenance provision ( CMOM) for the SSOs. The City of Millbrae has
developed a Sanitary Sewer Management Plan ( SSMP), which is a system- specific management
document describing the City’s program to minimize the number, volume and impact of SSOs. The
Sanitation Fund revenues decreased $ 0.05 million due to a reduction in consumption. On the other hand,
the Storm Drain Fund expenditures decreased $ 0.02 million and the revenues remained at the same level
as 03- 04.
As shown in the “ Statement of Cash Flows,” Net Cash Flows increased $ 5.5 million. Water Fund cash
flow increased $ 1.4 million, Sanitation Fund increased $ 4.1 million, and Storm Drain Fund decreased
almost $ 0.1 Million. Water Fund cash flow improved mainly from the inter- fund receivable payments
received, the Sanitation Fund cash flow increased as a result of a new loan secured, and the Storm Drain
Fund cash flow continued shrink due to revenues that could not fully cover expenditures.
The City’s Fund Financial Statements
Governmental Funds
At June 30, 2005, the City’s governmental funds reported combined fund balances of $ 16.5 million,
which was a $ 1.5 million increase or 10.4% compared to the prior year. Part of this increase occurred in
the General Fund, which accounted for $ 1.1 million of the increase. Although the Library Project Fund
balance declined by $ 3.8 million, a total of a $ 4.2 million increase in the Redevelopment Agency Funds
and the U. S. 101/ Millbrae Avenue Improvement Projects Fund helped to bring a net Fund Balance
increase of $ 0.4 million, in addition to the $ 1.1 million improvement in General Fund balance.
Governmental fund revenues increased $ 0.2 million this year to a new total of $ 19.4 million mainly from
a 2.4 million increase in General Fund and $ 0.4 million in Redevelopment Agency funds. Of this
amount, a total of $ 2.6 million needed to offset the revenue losses in the Library Fund ($ 1.7 million) and
in the Other Governmental funds ($ 0.9 million). Other Governmental funds revenues declined primarily
due to $ 1 million developer fees/ permits revenue that was collected in 03- 04 for the Specific Area new
developments, which were one- time assessments in nature. Expenditures increased $ 1.5 million this year
to a new total of $ 26 million. The increase in expenditures primarily resulted from a $ 0.2 million increase
in General Fund and a $ 4.8 million increase in Redevelopment funds, which netted out with a $ 2.8
million decrease in Library Project Fund and a $ 0.7 million reduction in Other Governmental funds.
Among the Other Governmental funds, Gas Tax Funds and transportation grants funds expenditures
decreased $ 0.3 million and the Pension Obligation Fund decreased $ 0.3 million due to the Bonds issuance
costs incurred in 03- 04.
Proprietary Funds
Enterprise Fund net assets totaled $ 15.2 million at June 30, 2005, a decrease of $ 0.11 million from the
prior year. Of which, the Sanitation Fund accounted for a $ 0.15 million decrease in net assets and the
Storm Drain Fund for a $ 0.08 million decrease, although the Water Fund improved $ 0.12 million.
Operating revenues decreased $ 0.4 million primarily resulted from reduction in consumption due a wetter
than normal year. Non- Operating expenses over revenues increased primarily due to retirement of old
Sanitation loan.
Enterprise Fund operating expenses were $ 7.6 million in fiscal 2005, up $ 0.2 million from the prior year.
Operating expenses increased $ 0.2 million mainly from the Sanitation Fund for increased staffing for two
new Maintenance Workers.
ANALYSES OF MAJOR GOVERNMENTAL FUNDS AND PROPRIETARY FUNDS
General Fund
General Fund revenues increased to $ 13.1 million, a $ 2.4 million increase over last year. Property taxes
increased $ 2.4 million mainly, as a result of the $ 1.1 million Fire Assessment Tax, a $ 1.1 million for the
Property Tax in Lieu of Vehicle License Fee, and a $ 0.2 million increase for the regular Property Taxes.
Transient Occupancy Tax improved 3%, a $ 0.07 million increase from the prior year. Sales Taxes
suffered a loss of $ 0.06 million primarily due to a slow recovery and a method change in the distribution
of the Sales Taxes by the State Legislature – commonly referred to as the ‘ triple flip’. Under the new
‘ triple flip’ revenue ‘ swapping’ procedures, 25% of the local share of the 1% Sales Taxes was shifted to
the State of California starting 2004- 05. In turn, the local loss was to be reimbursed by the County from
the County Educational Revenue Augmentation Fund ( ERAF). Because of a timing difference, local
governments were not fully reimbursed for the current year loss. Use of Money and Property revenues
increased $ 0.3 million due to fair value adjustments and improvements in interest earnings. Other Taxes
increased $ 0.15 million. Of this amount, a $ 0.14 million was from the refuse and other franchise fees.
Miscellaneous Revenues increased $ 0.1 million mainly from a reimbursement for the Library Project
costs incurred and advanced by the General Fund. License and Permits decreased due to one- time
developer fees/ permits for the Station Specific Area developments that were collected in advance,
primarily in 03- 04.
General Fund expenditures were up $ 0.16 million from the prior year level. Fire expenditures increased
$ 0.4 million mainly resulted from increased overtime and worker’s compensation costs, Culture and
Recreation increased $ 0.09 million for a new Maintenance Worker hired and the Senior Program
Coordinator changed to full- time in 2004- 05, Community Development and Streets increased a total of
$ 0.04 million, and Capital Outlays increased a fraction. The expenditure savings from the Police
Department totaled $ 0.35 million and $ 0.06 from the General Government funds, which helped to lower
the overall General Fund expenditure increases. Police expenditures decreased due to three Police
Officers and one Lieutenant were on worker’s compensation who were separated from Millbrae in early
2004- 05. General Governments expenditure decreased mainly due to the installment payments for the
PERS Survival premiums ended in 03- 04 around $ 0.25 million. Administration and City Attorney
departmental expenditures increased $ 0.19 million due to new hires of a City Manager and a City Clerk
and extensive time required from the City Attorney for resolving three major lawsuits in 2004- 05.
The City received a total of $ 0.6 million from sale of real property in 03- 04. The City Council approved
the action as part of a General Fund Budget balancing strategy. The property was sold to the
Redevelopment Agency for housing. As a result Proceeds from Sale of Properties decreased $ 0.6 million.
“ Transfers In” increased $ 0.3 million and “ Transfers Out” decreased $ 0.1 million comparing to 2004.
During 2005 the City Council authorized transfer of $ 0.3 million from the Developer Permits, the
Traveler’s Settlements, and the Parks Special Revenue funds to compensate General Fund for costs
incurred for the benefit of funds making the transfers; $ 0.05 million from the General Liability to fund
needed capital improvements and the rest from the Police Station Remodel Project fund. These transfers
were one- time in nature. The General Fund Transfers Out decreased $ 0.1 million mainly due to a
reduction in transfers to the Self- Insurance funds from the $ 0.4 million level in 2004 to $ 0.3 million in
2005.
At June 30, 2005, the General Fund Balance comprised of $ 1.4 million reserved almost entirely for
encumbrances and advances to other funds, with a $ 0.1 million left for unreserved and undesignated fund
balance. The unreserved amount would be increased when the Advance Receivable of $ 1.1 million from
Redevelopment Agency were to be paid back.
Other Major Governmental Funds
Redevelopment Agency Special Revenue
The tax increment revenues increased 14% over the prior year due to new construction and increases in
property assessment value. The Use of Money and Property revenue increased due to fair value
adjustments for investment portfolios and improvement in interest rates. The expenditures decreased $ 0.6
million because a piece of land was purchased in 03- 04 for a total of $ 0.6 million. The land was reserved
for housing development.
Redevelopment Agency Debt Service
Tax increment revenues increased 14% over the prior year due to new construction and increased
assessment valuations. Interest income increased because of fair value adjustments and interest rates
improvement. Proceeds from Long- Term Debt increased $ 5.5 million. This was due to a portion of the
2005 RDA Bonds proceeds were received for retirement of the 1993 Bonds and the associated bonds
issuance and insurance costs. Of this amount, $ 5 million was used for retirement of the 1993 Bonds
outstanding amount and the rest $ 0.5 million used for Bonds issuance and insurance costs. The Millbrae
Redevelopment Agency’s pass- through expenditures increased $ 0.2 million because the State of
California legislatures had required local governments to shift $ 250 million in property tax revenues to
the Education Revenue Augmentation Fund ( ERAF) for K - 12 schools and community colleges during
2004- 05 and 2005- 06 fiscal years. The Millbrae RDA required contribution amount was $ 0.2 million
toward the ERAF fund in 2004- 05. At June 30, 2005 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. Expenditures decreased $ 0.2 million
mainly due to the costs incurred in 2004 for the Waste Water Treatment Plant redesign and the Prime
Development on El Camino Real. The Agency Board decided to a hold on projects due to the increase in
required pass through payments. During 2005 fiscal year Millbrae RDA issued $ 8.6 million of new
Bonds. $ 3.1 million of this amount was designated for development opportunities in the redevelopment
area. On June 30, 2005, the RDA Capital Projects fund balance increased to $ 6.8 million, a $ 2.6 million
increase over the prior year.
Library Capital Project
The Library Capital Project fund balance declined to $ 0.1 million due to the project completion in
November 2004. In fiscal year 2005 approximately $ 3.6 million was spent on the Library Project. $ 3.4
million of this amount was spent on construction and 0.2 million on project management. The project
began on April 1, 2003.
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 $ 0.1 million in the current year to a total of $ 7.6 million. Water
sales revenue decreased $ 0.37 million from a year ago, due to a wetter than normal spring and a cool
summer in 2005. Although the increases in personnel and contractual services were higher than the
savings in water purchase costs, the Water Fund ended with a net $ 0.1 million increase in net assets since
the current year revenues fully covered the expenses.
Waste Water Treatment Facility ( Sanitation)
The Sanitation Fund’s net assets decreased $ 0.2 million in Fiscal Year 2005 down to a total of $ 6.7
million. Although the total expenditures increased $ 0.2 million primarily due to staffing increases,
revenues were able to fully cover all the expenses with a net operating income of $ 0.05 million. The
Sanitation Fund revenues went down slightly from the prior year. Personnel costs increased as a result of
the hiring of two new Sewer Collection Maintenance Workers. The increase in staffing levels was needed
for the City being able to comply with the U. S. Environment Protection Agency ( EPA) proposed Sanitary
Sewer Overflow ( SSO) requirements, under the Capacity, Management, Operation, and Maintenance
( CMOM) provisions. The main goal of CMOM is to prevent SSOs and to provide a plan and schedule for
measures to be implemented to prevent SSOs. The City of Millbrae has developed a Sanitary Sewer
Management Plan which is a system- specific management document for minimizing the number, volume
and impact of SSOs. The net loss of $ 0.2 million in Non- Operating transactions further wiped out the
Operating Income of $ 0.05 million entirely. Sanitation Fund net assets ended with a loss of $ 0.15 million
for the year.
A total of $ 1.6 million of the $ 6.7 million Sanitation Fund Net Assets was unrestricted at the fiscal year
end.
Storm Drain
The Storm Drain Fund net assets continued to suffer with a decline of $ 0.08 million, primarily due to
revenues that could not fully cover all the expenses.
Total Invested in Capital Assets Net of Related Debt accounted for $ 0.98 Million, which resulted a
negative $ 0.08 Million for the Unrestricted Net Assets.
CAPITAL ASSETS
At the end of fiscal 2005 the City had $ 23 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
2005 2004
Governmental Activities:
Land $ 1.97 $ 1.97
Land improvements 0.86 0.86
Buildings and improvements 19.66 16.34
Equipment 2.84 2.97
Automobiles and Trucks 2.21 2.36
Infrastructure 2.55 2.07
Less accumulated depreciation ( 7.09) ( 6.68)
Totals $ 23.00 $ 19.89
Business- type Activities
Land $ 0.00 $ 0.00
Land improvements 0.22 0.38
Buildings 5.88 4.88
Equipment 8.28 7.98
Infrastructure 14.92 14.49
Automobiles and Trucks .05 .05
Less accumulated depreciation ( 16.04) ( 15.52)
Totals $ 13.31 $ 12.26
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.
Table 7
Outstanding Debt
( in Millions)
2005 2004
Governmental activities
Tax Allocation Bonds ( issued by the
Redevelopment Agency) $ 8.59 $ 5.02
Certificates of Participation 3.63 3.74
Public Library Project Bonds 10.55 10.58
Pension Obligation Bonds Series A- 2 11.66 11.52
Storm Water District # 1 Bonds 0.00 0.03
Natural Disaster Assistance Loan 2.69 2.55
$ 37.12 $ 33.44
Business- type Activities
Wastewater Bank Loan – Sanitary Sewer Project $ 6.45 $ 1.26
$ 6.45 $ 1.26
SPECIAL ASSESSMENT DISTRICT DEBT
At June 30, 2005, the special assessment district debt was fully paid off for the Plaza Bay Special
Assessment district. This debt was secured only by special assessments on the real property in the district
issuing the debt, and was not the City’s responsibility, although the City did act as this District’s agent in
the collection and remittance of assessments.
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.
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.
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
presents similar information to the old balance sheet format, but presents it in a way that 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 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.
CITY OF MILLBRAE
STATEMENT OF NET ASSETS
JUNE 30, 2005
Governmental Business- Type
Activities Activities Total
ASSETS
Cash and investments ( Note 3) $ 16,142,912 $ 7,251,231 $ 23,394,143
Cash with fiscal agent ( Note 3) 2,413,932 2,413,932
Receivables:
Taxes 634,164 634,164
Accounts - net 344,115 1,599,974 1,944,089
Accrued interest 141,211 141,211
Due from other governmental agencies 119,453 3,480 122,933
Loans ( Note 5) 833,470 833,470
Internal balances ( Note 4D) ( 594,802) 594,802
Prepaid items 4,000 4,000
Prepaid pension obligations ( Note 7D) 10,696,000 10,696,000
Capital assets, net of accumulated depreciation ( Note 6) 22,999,308 13,306,068 36,305,376
Total Assets 53,733,763 22,755,555 76,489,318
LIABILITIES
Accounts payable 502,986 431,706 934,692
Interest payable 51,349 51,349
Deposits 972,881 381,470 1,354,351
Unearned revenue 187,833 187,833
Noncurrent portion compensated absences ( Note 1G) 1,933,804 221,330 2,155,134
Noncurrent portion accrued self- insurance ( Note 11) 972,054 972,054
Long- term debt ( Note 7)
Portion due within one year 200,000 200,208 400,208
Portion due in more than one year 36,924,148 6,252,741 43,176,889
Total Liabilities 41,693,706 7,538,804 49,232,510
NET ASSETS ( Note 9)
Invested in capital assets, net of related debt 8,809,308 11,187,573 19,996,881
Restricted for:
Capital projects 195,614 195,614
Debt service 2,459,513 2,459,513
Redevelopment 5,968,351 5,968,351
Special revenue programs 3,188,181 3,188,181
Total Restricted Net Assets 11,811,659 11,811,659
Unrestricted ( 8,580,910) 4,029,178 ( 4,551,732)
Total Net Assets $ 12,040,057 $ 15,216,751 $ 27,256,808
See accompanying notes to financial statements
CITY OF MILLBRAE
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2005
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 $ 1,417,551 $ 106,610 ($ 1,310,941) ($ 1,310,941)
Public safety 8,835,583 531,191 274,362 ( 8,030,030) ( 8,030,030)
Highways and streets 1,628,924 221,754 1,001,809 ( 405,361) ( 405,361)
Culture and recreation 1,971,715 668,312 51,408 ( 1,251,995) ( 1,251,995)
Community development 3,099,053 509,239 ( 2,589,814) ( 2,589,814)
Interest on long term debt 1,478,185 ( 1,478,185) ( 1,478,185)
Total Governmental Activities 18,431,011 2,037,106 1,327,579 ( 15,066,326) ( 15,066,326)
Business- type Activities:
Municipal Water System 3,519,464 3,647,300 $ 127,836 127,836
Municipal Waste Water Treatment Facility 3,906,561 3,758,868 ( 147,693) ( 147,693)
Storm Drain 318,489 220,912 ( 97,577) ( 97,577)
Total Business- type Activities 7,744,514 7,627,080 ( 117,434) ( 117,434)
Total $ 26,175,525 $ 9,664,186 $ 1,327,579 ( 15,066,326) ( 117,434) ( 15,183,760)
General revenues:
Taxes:
Property taxes 8,028,160 8,028,160
Incremental property tax 514,664 514,664
Sales taxes 1,883,793 1,883,793
Transient occupancy tax 2,281,978 2,281,978
Other taxes 1,167,562 1,167,562
Motor vehicle in lieu 491,468 491,468
Rental income 170,604 170,604
Investment earnings 547,092 91,713 638,805
Miscellaneous 180,949 78,205 259,154
Transfers 7,000 ( 7,000)
Total general revenues and transfers 15,273,270 162,918 15,436,188
Change in Net Assets 206,944 45,484 252,428
Net Assets- Beginning 11,833,113 15,171,267 27,004,380
Net Assets- Ending $ 12,040,057 $ 15,216,751 $ 27,256,808
See accompanying notes to financial statements
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 and
the practice of combining like funds and presenting their totals in separate columns ( Combined Financial
Statements) has been discontinued, along with the use of the General Fixed Assets and General Long- term
Debt Account Groups.
MAJOR GOVERNMENTAL FUNDS
The funds described below were determined to be Major Funds by the City in fiscal 2005. 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.
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.
LIBRARY CAPITAL PROJECT FUND
To account for project costs funded by proceeds of the 2001 General Obligation Bonds.
CITY OF MILLBRAE
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2005
Redevelopment Redevelopment Redevelopment
Agency Agency Agency
Special Revenue Debt Service Capital Projects
General Fund Fund Fund
ASSETS
Cash and investments ( Note 3) $ 43,071 1,367,236 $ 2,672,787 $ 6,865,320
Cash with fiscal agent ( Note 3) 544,967
Receivables:
Taxes 595,332
Accounts - net 37,401
Accrued interest 15,166 126,045
Due from other funds ( Note 4A) 502,703
Due from other governmental agencies 68,154
Loans ( Note 5) 833,470
Advances to other funds ( Note 4B) 1,090,100
Prepaid items
Total Assets $ 2,351,927 $ 2,200,706 $ 3,343,799 $ 6,865,320
LIABILITIES
Accounts payable $ 355,908 $ 20,481
Due to other funds ( Note 4A)
Deposits 255,221 $ 544
Deferred revenue 187,833
Advances from other funds ( Note 4B) $ 1,690,100
Total Liabilities 798,962 544 1,690,100 20,481
FUND BALANCES
Fund balance ( Note 9)
Reserved for:
Encumbrances 344,987 10,350 25,896
Debt service 1,653,699
Capital outlay 1,321,542
Advances, prepaids and loans receivable 1,090,100 833,470
Unreserved:
Designated
Special Revenue Funds prior year
operating budget carryovers
Special Revenue Funds capital outlay 2,029,991
Undesignated, Reported in: 34,800
General Fund 117,878
Special Revenue Funds
Capital Projects Funds 4,788,952
Total Fund Balances ( Deficit) 1,552,965 2,200,162 1,653,699 6,844,839
Total Liabilities and Fund Balances $ 2,351,927 $ 2,200,706 $ 3,343,799 $ 6,865,320
See accompanying notes to financial statements
Library Other Total
Capital Governmental Governmental
Project Funds Funds
$ 142,930 $ 3,119,800 $ 14,211,144
1,868,965 2,413,932
38,832 634,164
302,628 340,029
141,211
502,703
51,299 119,453
833,470
1,090,100
4,000 4,000
$ 142,930 $ 5,385,524 $ 20,290,206
$ 2,838 $ 91,357 $ 470,584
502,703 502,703
717,116 972,881
187,833
1,690,100
2,838 1,311,176 3,824,101
3,500 262,680 647,413
805,814 2,459,513
1,321,542
4,000 1,927,570
135,447 744,163 879,610
1,145 356,184 2,387,320
34,800
117,878
843,698 843,698
1,057,809 5,846,761
140,092 4,074,348 16,466,105
$ 142,930 $ 5,385,524 $ 20,290,206
CITY OF MILLBRAE
Reconciliation of the
GOVERNMENTAL FUNDS -- BALANCE SHEET
with the
STATEMENT OF NET ASSETS
JUNE 30, 2005
Total fund balances reported on the Governmental Funds Balance Sheet $ 16,466,105
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 22,432,293
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 1,931,768
Accounts receivable 4,086
Internal balances 5,198
Capital assets 567,015
Accounts payable ( 32,402)
Compensated absences ( 15,565)
Accrued self- insurance ( 972,054)
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 10,696,000
Long- term debt ( 37,124,148)
Non- current portion of compensated absences ( 1,918,239)
NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 12,040,057
See accompanying notes to financial statements
CITY OF MILLBRAE
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
FOR THE YEAR ENDED JUNE 30, 2005
Redevelopment Redevelopment Redevelopment
Agency Agency Agency
Special Revenue Debt Service Capital Projects
General Fund Fund Fund
REVENUES
Property tax $ 5,333,803 $ 514,664 $ 2,058,660
Sales tax 1,956,568
Transient occupancy tax 2,281,978
Other taxes 1,167,562
Licenses and permits 298,596
Charges for services 595,376
Fines and forfeitures 197,962
Use of money and property 440,075 32,483 85,214 $ 99,115
Grants and intergovernmental 585,565
Miscellaneous 269,050 535
Total Revenues 13,126,535 547,147 2,144,409 99,115
EXPENDITURES
Current:
General government 1,162,097
Public safety 8,259,715
Highways and streets 810,854
Culture and recreation 707,073
Community development 474,359 81,897 471,995 541,314
Payments to property tax pass throughs ( Note 1F) 1,164,183
Capital outlay 48,567 4,763
Debt service
Principal 5,015,000
Interest and fiscal charges 440,933
Total Expenditures 11,462,665 81,897 7,092,111 546,077
EXCESS ( DEFICIENCY) OF REVENUES
OVER EXPENDITURES 1,663,870 465,250 ( 4,947,702) ( 446,962)
OTHER FINANCING SOURCES ( USES)
Proceeds from long- term debt ( Note 7) 5,513,352 3,076,648
Transfers in ( Note 4C) 450,934 115,423
Transfers ( out) ( Note 4C) ( 982,096) ( 115,423) ( 5,000)
Total Other Financing Sources ( Uses) ( 531,162) ( 115,423) 5,628,775 3,071,648
NET CHANGE IN FUND BALANCES 1,132,708 349,827 681,073 2,624,686
BEGINNING FUND BALANCES 420,257 1,850,335 972,626 4,220,153
ENDING FUND BALANCES $ 1,552,965 $ 2,200,162 $ 1,653,699 $ 6,844,839
See accompanying notes to financial statements
Library Other Total
Capital Governmental Governmental
Project Funds Funds
$ 635,697 $ 8,542,824
1,956,568
2,281,978
342,622 1,510,184
50,583 349,179
784,277 1,379,653
5,261 203,223
($ 21,955) 172,898 807,830
1,418,631 2,004,196
99,947 369,532
( 21,955) 3,509,916 19,405,167
1,162,097
86,407 8,346,122
525,706 1,336,560
988,880 1,695,953
200,165 93,262 1,862,992
1,164,183
3,437,045 418,816 3,909,191
315,000 5,330,000
764,177 1,205,110
3,637,210 3,192,248 26,012,208
( 3,659,165) 317,668 ( 6,607,041)
8,590,000
949,610 1,515,967
( 127,000) ( 725,458) ( 1,954,977)
( 127,000) 224,152 8,150,990
( 3,786,165) 541,820 1,543,949
3,926,257 3,532,528 14,922,156
$ 140,092 $ 4,074,348 $ 16,466,105
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, 2005
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 $ 1,543,949
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 expenditures are therefore added back to fund balance 3,909,191
Depreciation expense is deducted from the fund balance
( Depreciation expense is net of internal service fund depreciation
of $ 151,949 which has already been allocated to serviced funds) ( 595,628)
Gain on sale of properties ( 63,763)
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 ( 8,590,000)
Repayment of debt principal is added back to fund balance 5,330,000
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 ( 159,733)
Deferred revenue ( 781,927)
Compensated absences ( 42,262)
Unpaid interest added to long- term debt ( 273,075)
Amortization of prepaid pension obligation ( 504,000)
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 434,192
CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 206,944
See accompanying notes to financial statements
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 concept of major funds established by GASB Statement 34 extends to Proprietary Funds. The City
has identified the funds below as major proprietary funds in fiscal 2005.
GASB 34 does not provide for the disclosure of budget vs. actual comparisons regarding proprietary funds
that are major funds.
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.
CITY OF MILLBRAE
PROPRIETARY FUNDS
STATEMENT OF NET ASSETS
JUNE 30, 2005
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) $ 1,637,634 $ 5,421,846 $ 191,751 $ 7,251,231 $ 1,931,768
Receivables:
Accounts - net 714,814 885,160 1,599,974 4,086
Due from other governmental agencies 3,480 3,480
Total Current Assets 2,352,448 6,307,006 195,231 8,854,685 1,935,854
Total Noncurrent Assets:
Advances to other funds ( Note 4B) 650,000 650,000
Capital assets, net of accumulated depreciation ( Note 6) 5,140,289 7,190,356 975,423 13,306,068 567,015
Total Assets 8,142,737 13,497,362 1,170,654 22,810,753 2,502,869
LIABILITIES
Current Liabilities:
Accounts payable 340,504 80,093 11,109 431,706 32,402
Interest payable 51,349 51,349
Deposits 166,189 18,207 197,074 381,470
Long- term debt due within one year ( Note 7) 200,208 200,208
Total Current Liabilities 506,693 349,857 208,183 1,064,733 32,402
Noncurrent Liabilities:
Compensated absences ( Note 1G) 35,183 174,077 12,070 221,330 15,565
Advances from other funds ( Note 4B) 50,000 50,000
Accrued self- insurance ( Note 11) 972,054
Long- term debt ( Note 7)
Due in more than one year 6,252,741 6,252,741
Total Liabilities 541,876 6,776,675 270,253 7,588,804 1,020,021
NET ASSETS ( Note 9)
Invested in capital assets,
net of related debt 5,140,289 5,071,861 975,423 11,187,573 567,015
Unrestricted 2,460,572 1,648,826 ( 75,022) 4,034,376 915,833
Total Net Assets $ 7,600,861 $ 6,720,687 $ 900,401 15,221,949 $ 1,482,848
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. ( 5,198)
Net assets business- type activities $ 15,216,751
See accompanying notes to financial statements
CITY OF MILLBRAE
PROPRIETARY FUNDS
STATEMENT OF REVENUE, EXPENSES
AND CHANGES IN FUND NET ASSETS
FOR THE YEAR ENDED JUNE 30, 2005
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 $ 3,647,300 $ 3,647,300
Sewer service fees $ 3,758,868 3,758,868
Equipment rental $ 606,324
Interdepartmental charges 946,392
Storm drain fees $ 220,912 220,912
Miscellaneous 6,745 35,062 36,398 78,205 401,846
Total Operating Revenues 3,654,045 3,793,930 257,310 7,705,285 1,954,562
OPERATING EXPENSES
Personnel services 1,137,148 2,149,954 173,724 3,460,826 396,373
Contractual services 364,408 615,107 97,367 1,076,882 173,524
Materials, supplies and other services 355,798 442,000 24,642 822,440 123,355
Water purchases 1,431,494 1,431,494
Depreciation 248,513 376,927 39,892 665,332 151,949
Utilities 25,904 155,634 6,758 188,296 924
Insurance premiums and claims 1,140,046
Total Operating Expenses 3,563,265 3,739,622 342,383 7,645,270 1,986,171
Operating Income ( Loss) 90,780 54,308 ( 85,073) 60,015 ( 31,609)
NONOPERATING REVENUES ( EXPENSES)
Loss on disposal of capital assets ( 39,872) ( 39,872) 6,878
Interest revenue 36,427 50,083 5,203 91,713 7,715
Interest expense ( 213,907) ( 213,907)
Total Nonoperating Revenues ( Expenses) 36,427 ( 203,696) 5,203 ( 162,066) 14,593
Income ( Loss) Before Transfers 127,207 ( 149,388) ( 79,870) ( 102,051) ( 17,016)
Transfers in ( Note 4C) 496,010
Transfers ( out) ( Note 4C) ( 7,000) ( 7,000) ( 50,000)
Net transfers ( 7,000) ( 7,000) 446,010
Change in net assets 120,207 ( 149,388) ( 79,870) ( 109,051) 428,994
BEGINNING NET ASSETS 7,480,654 6,870,075 980,271 1,053,854
ENDING NET ASSETS $ 7,600,861 $ 6,720,687 $ 900,401 $ 1,482,848
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 which those funds service 154,535
Change in net assets of business- type activities $ 45,484
See accompanying notes to financial statements
CITY OF MILLBRAE
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2005
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 $ 3,778,414 $ 3,778,881 $ 257,669 $ 7,814,964 $ 1,950,476
Payments to customers 10,831 1,352 12,183
Payments to suppliers ( 2,157,323) ( 1,212,788) ( 121,883) ( 3,491,994) ( 276,925)
Payments to employees ( 1,137,911) ( 2,124,551) ( 170,414) ( 3,432,876) ( 399,124)
Claims paid ( 874,952)
Cash Flows from Operating Activities 494,011 442,894 ( 34,628) 902,277 399,475
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Interfund payments 1,228,706 1,228,706
Transfers in 496,010
Transfers ( out) ( 7,000) ( 7,000) ( 50,000)
Cash Flows from Noncapital Financing Activities 1,221,706 1,221,706 446,010
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Acquisition of capital assets ( 316,131) ( 1,389,832) ( 44,860) ( 1,750,823) 3,035
Proceeds from long- term debt 6,486,209 6,486,209
Principal payments on capital debt ( 1,361,700) ( 1,361,700)
Debt discounts and issue costs paid ( 33,540) ( 33,540)
Interest paid ( 78,605) ( 78,605)
Cash Flows from Capital and Related Financing Activities ( 316,131) 3,622,532 ( 44,860) 3,261,541 3,035
CASH FLOWS FROM INVESTING ACTIVITIES
Interest 36,427 50,083 5,203 91,713 7,715
Cash Flows from Investing Activities 36,427 50,083 5,203 91,713 7,715
Net Cash Flows 1,436,013 4,115,509 ( 74,285) 5,477,237 856,235
Cash and investments at beginning of period 201,621 1,306,337 266,036 1,773,994 1,075,533
Cash and investments at end of period $ 1,637,634 $ 5,421,846 $ 191,751 $ 7,251,231 $ 1,931,768
Reconciliation of Operating Income ( Loss) to Cash Flows
from Operating Activities:
Operating income ( loss) $ 90,780 $ 54,308 ($ 85,073) $ 60,015 ($ 31,609)
Adjustments to reconcile operating income ( Loss) to cash flows
from operating activities:
Depreciation 248,513 376,927 39,892 665,332 151,949
Change in assets and liabilities:
Receivables, net 124,369 ( 15,049) 3,839 113,159 ( 4,086)
Due from other governmental agencies ( 3,480) ( 3,480)
Accounts payable and other accrued expenses 20,281 ( 47) 6,884 27,118 20,878
Other accrued expenses ( 763) 25,403 3,310 27,950 262,343
Refundable deposits 10,831 1,352 12,183
Cash Flows from Operating Activities $ 494,011 $ 442,894 ($ 34,628) $ 902,277 $ 399,475
See accompanying notes to financial statements
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, 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.
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.
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.
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( Continued)
REDEVELOPMENT AGENCY CAPITAL PROJECTS FUND - To account for the Millbrae
Redevelopment Agency’s resources for administrative costs, capital projects and long- term debt
obligation.
LIBRARY CAPITAL PROJECT FUND - To account for project costs funded by proceeds of
the 2001 General Obligation Bonds.
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, worker’s 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.
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.
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 $ 1,164,183 have been passed through to these agencies during
fiscal 2004- 2005.
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 $ 1,894,293 $ 193,380 $ 2,087,673
Additions 153,858 59,910 213,768
Payments ( 114,347) ( 31,960) ( 146,307)
Ending Balance $ 1,933,804 $ 221,330 $ 2,155,134
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.
H. Change of Fund
During fiscal 2005, the City renamed the Anne Loftus Capital Project Fund the Park Capital
Improvement Capital Project Fund and the Storm Relief Grant Special Revenue Fund the Hillcrest
Slide Maintenance Special Revenue Fund to better reflect the financial activities recorded in these
funds.
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 2 - BUDGETS AND BUDGETARY ACCOUNTING
A. Budgeting Procedures
In even numbered years, the City Administrator 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 Administrator 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) and
Enterprise Funds.
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 2005, the following funds incurred expenditures in excess of budget.
Amount in Excess
Fund/ Department of Appropriations
Plaza Bay Assessment District Fund
Debt Service: Interest and fiscal charges $ 5,413
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, 2005:
Cash and Investments
Available for
Operations
With Fiscal
Agents Total
Investments:
U. S. Government Agency Securities $ 861,280 $ 861,280
Local Agency Investment Fund $ 5,757,109 5,757,109
San Mateo County Investment Fund 1 7,154,751 17,154,751
Money Market Funds 1 09,454 1,552,652 1,662,106
Petty Cash 1 ,500 1,500
Cash in banks and on hand 3 71,329 371,329
Total cash and investments $ 23,394,143 $ 2,413,932 25,808,075
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.
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 3 - CASH AND INVESTMENTS ( Continued)
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 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
The City did not enter into any reverse repurchase agreements during the year ended June 30, 2005.
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:
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 3 - CASH AND INVESTMENTS ( Continued)
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
CA 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.
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.
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 25 to 60
or less Months Months Total
U. S. Government Agency Securities $ 317,299 $ 543,981 $ 861,280
Local Agency Investment Fund $ 5,757,109 5,757,109
San Mateo County Investment Fund 17,154,751 17,154,751
Money Market Funds 1,662,106 1,662,106
Petty Cash 1,500 1,500
City- wide cash and investment pool 371,329 371,329
Total Cash and Investments $ 24,946,795 $ 317,299 $ 543,981 $ 25,808,075
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 3 - CASH AND INVESTMENTS ( Continued)
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, 2005 for each investment type:
Investment Type AAA Total
U. S. Government Agency Securities $ 861,280 $ 861,280
Totals
Not rated:
Local Agency Investment Fund 5,757,109
San Mateo County Investment Fund 17,154,751
Money Market Funds 1,662,106
Cash in banks and on hand $ 371,329
Petty Cash 1,500
Total Cash and Investments $ 25,808,075
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.
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.
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 3 - CASH AND INVESTMENTS ( Continued)
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, 2005, these investments matured in an
average of 151 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, 2005, these
investments matured in an average of 1.4 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, 2005 interfund balances were as follows:
Receivable Fund Payable Fund Amount
General Fund Non- Major Governmental $ 502,703
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 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, Municipal Water System Enterprise Fund to the Redevelopment
Agency and from the General Fund to the Storm Drain Enterprise Fund amounted to $ 1,690,000 and
$ 50,000, respectively, as of June 30, 2005. The agreements do not specify a due date for repayment
of advances.
At June 30, 2005 outstanding balances from the above advances were as follows:
Receivable Fund Payable Fund Amount
General Fund Redevelopment Agency Debt Service $ 1,040,100
General Fund Storm Drain Enterprise Fund 50,000
Municipal Water System Enterprise Fund Redevelopment Agency Debt Service 650,000
$ 1,740,100
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, 2005 were as follows:
Fund Receiving Transfers Fund Making Transfers
Amount
Transferred
General Fund Non- Major Governmental Funds 273,934 C
Library Fund 127,000 A
Internal Service Funds 50,000 C
Non- Major Governmental Funds General Fund 667,096 A, B
Redevelopment Agency Capital Project 5,000 A
Non Major Governmental Funds 270,514 A, B
Municipal Water System 7,000 A
Internal Service Funds General Fund 315,000 D
Non Major Governmental Funds 181,010 D
Redevelopment Agency Debt Service Redevelopment Agency Special Revenue 115,423 B
Total Interfund Transfers $ 2,011,977
The reasons for these transfers are set forth below:
A To fund development activities.
B To fund debt service payments.
C To reimburse the General Fund for costs incurred for the benefit of funds making the transfer.
D To reimburse the fund receiving the transfer for costs incurred for the benefit of funds making the transfer.
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,
2005, First Time Home Buyer Loans in the amount of $ 883,470 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 $ 1,000 and an estimated useful life in excess of three years.
Since the City implemented GASB Statement 34 in fiscal year 2003, the City has until fiscal year
2007 to record all its infrastructure assets. Historical values for infrastructure assets will be recorded
in fiscal year 2006.
GASB Statement 34 requires that all capital assets with limited useful lives be depreciated over
their estimated useful lives. Alternatively, the “ modified approach” may be used for certain
capital assets. Depreciation is not provided under this approach, but all expenditures on these
assets are expensed, unless they are additions or improvements.
The purpose of depreciation is to spread the cost of capital assets equitably among all users over the
life of these assets. The amount charged to depreciation expense each year represents that year’s pro
rata share of the cost of capital assets.
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 6 - CAPITAL ASSETS ( Continued)
Depreciation is provided using the straight line method which means the cost of the asset is divided
by its expected useful life in years and the result is charged to expense each year until the asset is
fully depreciated. The City has assigned the useful lives listed below to capital assets:
Water and Waste Water Mains, Lines and Trunks 15- 20 years
Buildings and Improvements 50- 65 years
Furniture, Fixtures and Equipment 5- 20 years
Automobiles and Trucks 2- 10 years
Infrastructure 65 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.
Changes in fixed assets during the year ended June 30, 2005 comprise:
Balance at Balance at
June 30, 2004 Additions Retirements June 30, 2005
Governmental activities
Capital assets not being depreciated:
Land $ 1,967,619 $ 1,967,619
Total capital assets not being depreciated 1,967,619 1,967,619
Capital assets being depreciated:
Land Improvements 862,675 ($ 3,465) 859,210
Building and Improvements 16,348,214 $ 3,356,640 ( 44,478) 19,660,376
Furniture, Fixtures and Equipment 2,969,627 68,508 ( 197,790) 2,840,345
Automobiles and Trucks 2,358,691 8,905 ( 155,948) 2,211,648
Infrastructure 2,071,738 478,980 2,550,718
Total capital assets being depreciated 24,610,945 3,913,033 ( 401,681) 28,122,297
Less accumulated depreciation for:
Land Improvements 547,492 20,772 ( 3,445) 564,819
Building and Improvements 1,932,212 345,925 ( 8,756) 2,269,381
Furniture, Fixtures and Equipment 1,792,555 172,831 ( 169,770) 1,795,616
Automobiles and Trucks 1,807,631 144,032 ( 155,948) 1,795,715
Infrastructure 601,060 64,017 665,077
Total accumulated depreciation 6,680,950 747,577 ( 337,919) 7,090,608
Net capital assets being depreciated 17,929,995 3,165,456 ( 63,762) 21,031,689
Governmental activity capital assets, net $ 19,897,614 $ 3,165,456 ($ 63,762) $ 22,999,308
CITY OF MILLBRAE
Notes to Financial Statements
NOTE 6 - CAPITAL ASSETS ( Continued)
Balance at Balance at
June 30, 2004 Additions Retirements June 30, 2005
Business- type activities
Capital assets, being depreciated:
Land Improvements $ 382,108 ($ 167,296) $ 214,812
Building and Improvements 4,882,841 $ 994,516 5,877,357
Furniture, Fixtures and Equipment 7,982,298 316,789 ( 14,971) 8,284,116
Infrastructure 14,483,771 439,521 14,923,292
Automobiles and Trucks 50,057 50,057
Total capital assets being depreciated 27,781,075 1,750,826 ( 182,267) 29,349,634
Less accumulated depreciation for:
Land Improvements 198,932 16,569 ( 127,423) 88,078
Building and Improvements 2,461,571 92,637 2,554,208
Furniture, Fixtures and Equipment 4,625,150 352,633 ( 14,969) 4,962,814
Automobiles and Trucks 27,193 6,176 33,369
Infrastructure 8,207,780 197,317 8,405,097
Total accumulated depreciation 15,520,626 665,332 ( 142,392) 16,043,566
Net capital assets being depreciated 12,260,449 1,085,494 ( 39,875) 13,306,068
Business- type activity capital assets, net $ 12,260,449 $ 1,085,494 ($ 39,875) $ 13,306,068
At June 30, 2005, the Co- Generation Wastewater Project remaining costs are estimated to be
approximately $ 4.3 million.
A. Capital Asset Contributions
Some capital assets may be acquired using federal and State grant funds, or they may be contributed
by developers or other governments. GASB State