City of Redwood City
Redwood City, CA
Comprehensive Annual
Financial Report
fiscal year ended June 30, 2006
City of Redwood City
Redwood City, California
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
Fiscal Year Ended June 30, 2006
Prepared by
City of Redwood City Finance Department
City of Redwood City
Redwood City, California
Comprehensive Annual Financial Report
Fiscal Year Ended June 30, 2006
TABLE OF CONTENTS
_______________________________________________________________________________
I. INTRODUCTORY SECTION Exhibit Page
Finance Director's Letter of Transmittal................................................................................................ i
GFOA Certificate of Achievement for Excellence in Financial Reporting........................................... vii
CSMFO Certificate of Outstanding Financial Reporting ...................................................................... viii
Name of Principal Officials ................................................................................................................... ix
Names of Finance Department Staff...................................................................................................... x
Organization Charts ............................................................................................................................... xi
City of Redwood City Core Purpose ..................................................................................................... xiii
II. FINANCIAL SECTION
A. Independent Auditor’s Report on Basic Financial Statements ..................................................... 1
B. Management’s Discussion and Analysis ...................................................................................... 3
C. Basic Financial Statements:
Government- wide Financial Statements:
Statement of Net Assets .................................................................................................... 16
Statement of Activities...................................................................................................... 17
Fund Financial Statements:
Major Governmental Funds:
Balance Sheet.............................................................................................................. 20
Reconciliation of the Governmental Funds – Balance Sheet
With the Statement of Net Assets ................................................................... 21
Statement of Revenues, Expenditures, and Changes in Fund Balance....................... 22
Reconciliation of the Net Change in Fund Balances –
Total Governmental Funds with the Statement of Activities ......................... 23
Major Proprietary Funds:
Statement of Net Assets .............................................................................................. 25
Statement of Revenues, Expenses, and Changes in Fund Net Assets ........................ 26
Combining Statement of Cash Flows Increase ( Decrease)
in Cash and Cash Equivalents......................................................................... 27
City of Redwood City
Redwood City, California
Comprehensive Annual Financial Report
Fiscal Year Ended June 30, 2006
TABLE OF CONTENTS
_______________________________________________________________________________
II. FINANCIAL SECTION ( Continued) Exhibit Page
Fiduciary Funds:
Statement of Fiduciary Net Assets.............................................................................. 28
Notes to Financial Statements................................................................................................. 29
D. Required Supplementary Information:
General Fund – Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual..................................................... 62
Redevelopment Agency Fund - Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual..................................................... 63
E. Supplemental Information:
General Fund:
Comparative Balance Sheet .................................................................................................... 66
Comparative Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget ( GAAP Basis) and Actual...................................... 67
Schedule of Revenues Compared with Budget ( GAAP Basis) and Actual ............................ 68
Schedule of Expenditures Compared with Budget ( GAAP Basis) and Actual ...................... 69
Non- Major Governmental Funds:
Combining Balance Sheets ..................................................................................................... 72
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances .............. 76
Budgeted Non- Major Funds:
Combining Schedule of Revenues, Expenditures, and Changes in
Fund Balances - Budget and Actual ................................................................................. 80
Internal Service Funds:
Combining Statement of Net Assets ....................................................................................... 90
Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets ................. 91
Combining Statement of Cash Flows Increase ( Decrease)
in Cash and Cash Equivalents........................................................................................... 92
Agency Funds:
Combining Statement of Changes in Assets and Liabilities............................................. 94
City of Redwood City
Redwood City, California
Comprehensive Annual Financial Report
Fiscal Year Ended June 30, 2006
TABLE OF CONTENTS
_______________________________________________________________________________
III. STATISTICAL SECTION Schedule Page
Net Assets by Component - Last Five Fiscal Years .................................................... 1 95
Change in Net Assets - Last Five Fiscal Years............................................................. 2 96
Fund Balances - Governmental Funds - Last Five Fiscal Years................................... 3 97
Changes in Fund Balances - Governmental Funds - Last Five Fiscal Years................ 4 98
Assessed Value and Estimated Actual Value of Taxable Property -
Last Ten Fiscal Years ................................................................................................... 5 99
Direct and Overlapping Property Tax Rates - Last Ten Fiscal Years .......................... 6 100
Principal Property Tax Payers - Current Year and Nine Years Ago ............................ 7 101
Property Tax Levies and Collections - Last Ten Fiscal Years ..................................... 8 102
Ratios of Outstanding Debt by Type - Last Five Fiscal Years ..................................... 9 103
Direct and Overlapping Governmental Activities Debt ............................................... 10 104
Legal Debt Margin Information.................................................................................... 11 105
Pledged- Revenue Coverage - Last Ten Fiscal Years.................................................... 12 106
Demographic and Economic Statistics - Last Five Fiscal Years .................................. 13 108
Principal Employers...................................................................................................... 14 109
Full Time Equivalent Employees by Function - Last Five Fiscal Years ...................... 15 110
Operating Indicators by Function/ Program - Last Five Fiscal Years ........................... 16 111
Capital Asset Statistics by Function/ Program - Last Five Fiscal Years ....................... 17 112
Construction Values - Last Ten Fiscal Years ............................................................... 18 113
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1017 Middlefield Road
Redwood City, California 94063
Office of Director of Finance Telephone: ( 650) 780- 7070
and Financial Planning Fax: ( 650) 366- 2447
E- mail: mail@ redwoodcity. org
December 30, 2006
Honorable Mayor,
Members of the City Council,
City Manager, and Citizens of the
City of Redwood City
Redwood City, California
In accordance with the Charter of the City of Redwood City, we are submitting for your information and
consideration the Comprehensive Annual Financial Report of the City for the fiscal year ended June 30, 2006.
This report has been prepared by the City's Finance Department. The responsibility for both the accuracy of the
printed data and the completeness and fairness of the presentation including all disclosures rests with the City. It is
our opinion that the data presented is accurate in all material respects and that it is presented in a manner designed
to fairly set forth the financial positions and results of operations of the City and its related entities as measured by
the financial activities of their various funds, and that all disclosures necessary for the reader to gain a full
understanding of their financial activities have been included. The financial statements have been prepared
following the guidelines recommended by the Government Finance Officers Association of the United States and
Canada, and the standards adopted by the Governmental Accounting Standards Board.
In accordance with these guidelines, the accompanying report consists of three parts:
I. Introductory Section - Letter of Transmittal, GFOA and CSMFO Certificates of Achievement,
Names of Principal Officials, and Organization Charts
II. Financial Section – Independent Auditor's Report, Government- wide Financial Statements, Notes
to Financial Statements followed by Combining and Individual Fund Statements
III. Statistical Section - Presenting ten year historical trends of financial and non- financial data
Generally accepted accounting principles require that management provide a narrative introduction, overview, and
analysis to accompany the basic financial statements in the form of a Management’s Discussion and Analysis
( MD& A). This letter of transmittal is designed to complement the MD& A and should be read in conjunction with
it. Redwood City’s MD& A can be found immediately following the report of the independent auditors.
REPORTING ENTITY AND ITS SERVICES
Redwood City is a full service City, which was incorporated in 1867 and became a Charter City in 1929. The City
operates under a council- manager form of government and provides services such as police, fire, recreation and
parks, library, highways and streets, public improvements, planning and zoning, water, port facilities, and general
administrative services. Although the City maintains the sewer lines and pump stations, the sewer plant and
treatment services are provided by the South Bayside System Authority, a Joint Powers Authority of which
Redwood City is an equity holder.
This report includes all funds of Redwood City. The City Council serves in separate session as the governing
bodies of the Redwood City Redevelopment Agency, the Redwood City Facilities and Infrastructure Authority, and
the Public Financing Authority although these agencies are legal entities apart from the City. Under the City
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Charter, the City Council appoints the Board of Port Commissioners who oversees the operations of the Port of
Redwood City, which is considered a department of the City of Redwood City.
The general fund of the Redevelopment Agency and the agency’s low and moderate income housing fund are
shown as special revenue funds. Debt service paid during the year is shown under debt service funds. The Port of
Redwood City is an enterprise activity and is presented as an enterprise fund.
Financial information for separate legal entities related to the City including the Redwood City Facilities and
Infrastructure Authority, Redwood City Public Financing Authority, and Redwood City Redevelopment Agency is
blended in the City's financial statements in accordance with Governmental Accounting Standards Board Statement
No. 14.
FINANCIAL INFORMATION
Accounting System and Budgetary Control
The City's accounting records for governmental operations are maintained on a modified accrual basis, with the
revenues being recorded when both measurable and available, and expenditures being recorded when the services
or goods are received and the liabilities are incurred. Accounting records for the City's enterprises are maintained
on the accrual basis.
In developing and modifying the City's accounting system, consideration is given to the adequacy of internal
accounting controls. Internal accounting controls are designed to provide reasonable, but not absolute, assurance
regarding:
• The safeguarding of assets against loss from unauthorized use or disposition, and
• The reliability of financial records for preparing financial statements and maintaining accountability for
assets.
The concept of reasonable assurance recognizes that:
• The cost of a control should not exceed the benefits likely to be derived, and
• The evaluation of costs and benefits requires estimates and judgments by management.
All internal control evaluations occur within the above framework. We believe that all of the City's internal
accounting controls adequately safeguard assets and provide reasonable assurance of proper recording of financial
transactions.
Budgetary control is maintained at the program level by encumbering estimated purchase amounts prior to the
release of purchase orders to vendors. Purchase orders that result in an overrun of budget balances are not released
until additional appropriations are made available. Open encumbrances are reported as reservations of fund balance
at year- end.
The independent audit of the financial statements of the City of Redwood City was part of a broader, federally
mandated “ Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing
Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial
statements, but also on the audited government’s internal controls and compliance with legal requirements, with
special emphasis on internal controls and legal requirements involving the administration of federal awards. These
reports are available in the City of Redwood City’s separately issued Single Audit Report.
As a recipient of federal, state, and county financial assistance, the City is also responsible for ensuring that an
adequate internal control structure is in place to ensure compliance with applicable laws and regulations related to
those programs. This internal control structure is subject to periodic evaluation by management and the internal
audit staff of the government.
As demonstrated by the statements and schedules included in the financial section of this report, the City of
Redwood City continues to meet its responsibility for sound financial management.
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FACTORS AFFECTING FINANCIAL CONDITION
Local Economy
The City of Redwood City is currently affected by the economic recession that has enveloped the San Francisco
Bay Area and which is having a pronounced impact on the information technology industry. Although Redwood
City’s unemployment rate ( not seasonally adjusted) as of June 2006 was a respectable 4.0%, this low rate does not
reveal the decline in the number of jobs in the county over the past four years ( 420,100 jobs as of June 2001 to
348,000 as of June 2006). It is our hope and expectation that the local economy has “ bottomed out” and that the
local economy will soon be participating in the nationwide recovery.
Costco, a major big box retailer and one of the City’s larger sales tax generators, has proposed replacing their
existing 121,400 square foot store with a 160,000 square foot store along with the addition of a gas station with 16
fueling stations. An environmental impact report is currently being prepared and is expected to be presented to the
Planning Commission before the end of 2006. If approved, construction should begin in spring 2007 with
completion expected within five months of the commencement of construction.
The downtown cinema/ retail project opened in the summer of 2006. The cinema includes 20 screens while the
retail component of the project has 80,000 square feet of space. Tenants who have signed leases as of this date
include Century Theatres, Cost Plus World Markets, Shoe Pavilion, San Mateo Credit Union, Marble Slab,
Chipotle, Fatburger, Tacone, Escape from New York Pizza, and Café Portobella.
Cash Management
The City treasurer invests temporarily idle funds in accordance with the state government code and the investment
policy adopted by the City Council. During the year, funds were invested in certificates of deposits of banks, U. S.
agency securities, corporate debt securities, U. S. government securities, the Local Agency Investment Fund of the
State of California, and the County of San Mateo investment pool. Total investment earnings during the fiscal year
amounted to $ 6.7 million. At the end of fiscal year 2005/ 06, the total investments, including cash with fiscal agents,
cash at banks, and petty cash, stood at $ 206,115,740.
Redwood City's investment objectives are to maintain liquidity and to minimize credit and market risks while
maintaining a competitive yield on its portfolio. Accordingly, deposits were either insured by federal depository
insurance or collateralized.
Risk Management and Self- Insurance Funds
In July 1990, the City joined the Bay Cities Joint Powers Insurance Authority to meet its general liability insurance
needs. Bay Cities is a general liability insurance pool consisting of 17 San Francisco Bay Area public agencies.
The pool provides, through reinsurance, $ 1,000,000 of coverage in excess of the City's $ 250,000 self- insurance
retention. Claims administration and loss control support to member agencies are also provided by the insurance
pool. Bay Cities belongs to the California Affiliated Risk Management Authority ( CARMA) which is an excess
liability pool comprised of Bay Cities and five other local government insurance pools. CARMA provides
coverage from $ 1,000,001 to $ 20,000,000. The layer from $ 1,000,001 to $ 5,000,000 is self- insured by CARMA,
while the layer from $ 5,000,001 to $ 20,000,000 is insured by a commercial insurer.
Appropriation Limit
Article XIIIB of the California State Constitution, which became effective in the 1979/ 80 fiscal year, and which
was modified ( by Proposition 111) in November 1989, establishes, by formula, an appropriation limit for
governmental agencies. Using the appropriations of fiscal year 1978/ 79 as the base year, the limit is modified by
the change in the composite consumer price index, population, and the value of commercial property development
within the City limits during each fiscal year. Article XIIIB also sets the guidelines as to what is to be included in
the appropriation limits.
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The appropriation limit for Redwood City for the fiscal year 2005/ 06 is at $ 261,543,316 while the actual
appropriations subject to the limit amounted to $ 51,330,492. The following graph indicates the trend in
appropriations subject to limitation:
$ 0
$ 25,000,000
$ 50,000,000
$ 75,000,000
$ 100,000,000
$ 125,000,000
$ 150,000,000
$ 175,000,000
$ 200,000,000
$ 225,000,000
$ 250,000,000
$ 275,000,000
FY 2002- 03 FY 2003- 04 FY 2004- 05 FY2005- 06
APPROPRIATION LIMIT
All Funds Subject to Appropriation
Limit Sub. to Limit
Excluding General Improvement and Proprietary Funds
OTHER INFORMATION
Annual Independent Audit
The annual audit of the books and financial records of Redwood City was completed by Caporicci & Larson,
certified public accountants appointed by the City Council. The independent auditor's report has been made a part
of this 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 Redwood City for its Comprehensive Annual
Financial Report ( CAFR) for the fiscal year ended June 30, 2005. This is the 19th consecutive year that Redwood
City has received this prestigious award. In order to be awarded a certificate of achievement, a government must
publish an easily readable and efficiently organized comprehensive annual 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. We believe that our current CAFR continues to
meet the certificate of achievement program's requirements and we are submitting it to the GFOA to determine its
eligibility for another certificate.
The City was also awarded the California Society of Municipal Finance Officers ( CSMFO) Outstanding Financial
Reporting certificate for its CAFR for the fiscal year ended June 30, 2005. This was the 20th consecutive award to
Redwood City from CSMFO.
Acknowledgements
The preparation of this report could not have been achieved without the efficient and dedicated services of the
entire staff of the Finance Department. Special thanks are extended to Alison Freeman for her leadership in
overseeing this process, Irv Weinstock for his diligent proofreading, Kyi Khin, Araceli Fierro, and Rajesh Sewak
for their important contributions, and to Sandy Jennings for her relentless dedication to assembling and publishing
this document.
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I would also like to thank and commend the Redwood City Council and Ed Everett, City Manager, for their interest
and support in planning and conducting the financial operations of the City in a responsible and progressive manner
in the best interests of the residents of Redwood City.
Respectfully submitted,
Brian J. Ponty
Director of Finance and Financial Planning
City of Redwood City
Redwood City, California
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City of Redwood City
Comprehensive Annual Financial Report
June 30, 2006
ix
CITY OF REDWOOD CITY - REDWOOD CITY, CALIFORNIA
PRINCIPAL OFFICIALS
June 30, 2006
CITY COUNCIL
Barbara Pierce, Mayor ............................................................................. November 2007
Rosanne Foust, Vice Mayor..................................................................... November 2007
Alicia Aguirre .......................................................................................... November 2007
Ian Bain.................................................................................................... November 2007
Jim Hartnett.............................................................................................. November 2009
Diane Howard .......................................................................................... November 2009
Jeff Ira ...................................................................................................... November 2009
CITY MANAGER
Edward P. Everett
DEPARTMENT DIRECTORS
City Clerk................................................................................................. Patricia Howe
Community Development Services ......................................................... Joel Patterson
Finance and Financial Planning............................................................... Brian Ponty
Fire Chief ................................................................................................. Gerald Kohlmann
Human Resources .................................................................................... Bob Bell
Library ..................................................................................................... David Genesy
Parks, Recreation and Community Services............................................ Corinne Centeno
Police Chief.............................................................................................. Carlos Bolanos
Public Works Services ............................................................................. Peter Ingram
CITY ATTORNEY
Stan Yamamoto
City of Redwood City
1017 Middlefield Road
Redwood City, California 94063
Telephone: ( 650) 780- 7070
Fax: ( 650) 366- 2447
E- Mail: mail@ redwoodcity. org
Web Site: www. redwoodcity. org
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CITY OF REDWOOD CITY - REDWOOD CITY, CALIFORNIA
FINANCE DEPARTMENT STAFF
June 30, 2006
Brian Ponty .................................................... Director of Finance and Financial Planning
Alison Freeman.............................................. Financial Services Manager
Irvin Weinstock.............................................. Senior Accountant
Kyi Khin......................................................... Senior Accountant
Rajesh Sewak................................................. Senior Accountant
Araceli Fierro................................................. Senior Accountant
Sandy Jennings .............................................. Administrative Assistant
xi
City of Redwood City
June 30, 2006
Architectural Review Committee Home Improvement Loan Committee
Board of Building Review Housing & Human Concerns Committee
Port Manager
Board of Port Commissioners
Library Director
Library Board
Childcare Advisory Committee Park and Recreation Commission
Civic Cultural Commission Planning Commission
Fair Oaks Community Center Advisory Board Pride and Beautification Committee
Historic Resources Advisory Committee Senior Affairs Commission
City Attorney City Clerk
Community
Development Svcs
Parks, Recreation &
Community Services
Finance Department Police Department
Fire Department Public Works
Services
Human Resources
Assistant to the
City Manager
City Manager
Citizens'
City Council
xii
City of Redwood City
Finance Department
June 30, 2006
Annual Budget
Annual Financial Report
Treasury Management
Risk Management
General Administration
Fixed Assets
Accounts Payable
Subdivision Accounting
General Ledger
Labor Negotiations Support
State Reports
Capital Projects
General Improvement District 1- 64
Redevelopment Agency Accounting
South Bayside System Authority
Grant Accounting
Payroll
Cost Allocation Plans
Enterprise Fund Accounting
Treasury Accounting
Utility Billing and Collections
Business Licenses
Accounts Receivable
Purchasing
Parking Revenue Collection
Electronic Data Management Services
Software Development Services
Internet Services
Administrative
Assistant
Senior
Accountant
Senior
Accountant
Financial Services
Manager
Senior
Accountant
Revenue Svcs./
Senior
Accountant
Information
Technology
Manager
Director of Finance
and Financial Planning
xiii
CORE PURPOSE
Build a Great Community Together
CORE VALUES
Excellence:
Passion to Do Our Best in Each Moment
Integrity:
Do the Right Thing, Not the Easy Thing
Service:
We Care and It Makes a Difference
Creativity:
Freedom to Imagine and Courage to Act
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MANAGEMENT’S DISCUSSION AND ANALYSIS
This section of the City’s Comprehensive Annual Financial Report presents a narrative overview and analysis of
the City’s financial activities for the fiscal year ended June 30, 2006. We encourage readers to consider the
information presented here in conjunction with the accompanying transmittal letter and basic financial statements.
FISCAL YEAR 2005/ 06 FINANCIAL HIGHLIGHTS
Excluding one- time- only revenues, the City continues to experience moderate revenue growth as the local economy
recovers from the economic slow down that encompassed this area during the early part of this decade. Financial
highlights of the year include the following:
• The City’s total net assets increased $ 8.2 million in FY 2005/ 06, after a $ 17.14 million increase in the
preceding year. At June 30, 2006, net assets totaled $ 383.5 million.
• Total City revenues, including program and general revenues, were $ 142.3 million, a decrease of $ 1.3
million from the prior year, while total expenses were $ 134.2 million, an increase of $ 7.7 million from FY
2004/ 05.
• Net assets in governmental funds increased $ 6.2 million, while net assets in business activities increased
$ 2.0 million.
• Governmental program revenues were $ 25.3 million, a decrease of $ 14.2 million from FY 2004/ 05’ s $ 39.5
million.
• Governmental program expenses increased to $ 96.7 million in FY 2005/ 06, up $ 4.5 million from the prior
year.
• Revenues from business- type activities increased to $ 39.4 million in FY 2005/ 06, up $ 5.4 million from the
prior year.
• Expenses of business- type activities increased to $ 37.4 million in FY 2005/ 06, a $ 3 million increase from
the prior year.
• General fund revenues of $ 77 million increased by $ 7 million from the prior year.
• General fund balance of $ 43 million at the fiscal year end increased by $ 3.1 million from the prior year.
OVERVIEW OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT
This Comprehensive Annual Financial Report is in six parts:
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 supplementary information
5. Combining statements for non- major governmental funds and fiduciary 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.
MANAGEMENT’S DISCUSSION AND ANALYSIS
4
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. Over time, increases or decreases in net assets may serve as a
useful indicator of whether the financial position of the City is improving or deteriorating. 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 of 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, community development, public safety, public works, culture- recreation, public
improvements, planning and zoning, and general administration services. These services are supported by general
City revenues such as taxes, and by specific program revenues such as developer fees.
Business- type Activities — All the City’s enterprise activities are reported here, including water, sewer, parking,
and the Port of Redwood City. Unlike governmental services, these services are supported by charges paid by users
based on the amount of the service they use.
Government- wide financial statements are prepared on the accrual basis, which means they measure the flow of all
economic resources of the City as a whole.
The government- wide financial statements may be found on pages 16- 17 of this report.
Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated
for specific activities or objectives. The City of Redwood City, like other state and local governments, uses fund
accounting to ensure and demonstrate compliance with finance- related legal requirements. All of the funds of the
City of Redwood City can be divided into three categories: governmental funds, proprietary funds, and fiduciary
funds.
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 the City’s activities.
Governmental fund financial statements are prepared on the modified accrual basis, which means they measure
only current financial resources and uses. Capital assets and other long- lived assets, along with long- term
liabilities, are not presented in the governmental fund financial statements. Unlike the government- wide financial
MANAGEMENT’S DISCUSSION AND ANALYSIS
5
statements, governmental fund financial statements focus on near- term inflows and outflows of spendable
resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information
may be useful in evaluating the City’s near- term financing requirements.
Because the focus of governmental funds is narrower than that of the government- wide financial statements, it is
useful to compare the information presented for governmental funds with similar information presented for
governmental activities in the government- wide financial statements. By doing so, readers may better understand
the long- term impact of the City’s near- term financing decisions. Both the governmental fund balance sheet and
the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation
to facilitate this comparison between governmental funds and governmental activities.
The City of Redwood City maintains 27 individual governmental funds. Information is presented separately in the
governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in
fund balances for the general fund, the capital outlay fund, and the redevelopment agency fund, which are
considered to be major funds. Data from the other 24 governmental funds are combined into a single, aggregated
presentation. Individual fund data for each of these non- major governmental funds is provided in the form of
combining statements elsewhere in this report.
The City of Redwood City adopts an annual appropriated budget for its general fund and redevelopment agency
fund. A budgetary comparison statement has been provided for the general fund and redevelopment agency fund to
demonstrate compliance with this budget.
The governmental fund financial statements may be found on pages 20- 23 of this report.
Proprietary funds are maintained in two ways. Enterprise funds are used to report the same functions presented as
business- type activities in the government- wide financial statements. The City uses enterprise funds to account for
water, sewer, parking, and Port operations. Internal services funds are used to account for costs of the City’s
equipment services, the City’s insurance program, the costs of the City’s telephone/ communications and
information technology services, maintenance and repair of buildings, custodial services, delivery service, and
employee benefits. Because these services predominantly benefit governmental rather than business- type
functions, they have been included within governmental activities in the government- wide financial statements.
The proprietary fund financial statements may be found on pages 25- 27 of this report.
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 City- wide
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.
Fiduciary Funds
The City maintains fiduciary funds that account for tax free employee and employer contributions made under the
provisions of section 125 of the Internal Revenue Code ( cafeteria benefits fund), for employer contributions to a
retiree medical insurance fund, and for transactions involving the Seaport Consolidated Assessment District, the
Pacific Shores Community Facilities District, and the Shores Transportation Improvement District. The City’s
fiduciary activities are reported in the separate Statement of Fiduciary Net Assets and the Agency Funds Statement
of Changes in Assets and Liabilities. The accounting used for fiduciary funds is much like that used for proprietary
funds. These activities are excluded from the City’s other financial statements because the City cannot use these
assets to finance its own operations.
The fiduciary fund financial statement may be found on page 28 of this report.
MANAGEMENT’S DISCUSSION AND ANALYSIS
6
Notes to the Financial Statements
Notes to the Financial Statements provide additional information that is essential to a full understanding of the data
provided in the government- wide and fund financial statements.
The Notes to the Financial Statements may be found on pages 29- 59 of this report.
GOVERNMENT- WIDE FINANCIAL ANALYSIS
As noted earlier, net assets may over time serve as a useful indicator of the City’s financial position. The City’s
assets exceeded liabilities by $ 383.5 million at June 30, 2006.
City’s Net Assets ( in Millions)
Governmental Business- type
Activities Activities Total
2006 2005 2006 2005 2006 2005 Variance
$ $ $ $ $ $
Cash and investments 124.820 142.664 73.127 61.653 197.947 204.317 - 3.118%
Other assets 31.201 27.792 42.490 29.366 73.691 57.158 28.925%
Capital assets 213.125 196.187 89.308 85.483 302.433 281.670 7.371%
Total assets 369.146 366.643 204.925 176.502 574.071 543.145 5.694%
Long- term debt outstanding 83.133 86.510 73.507 48.528 156.640 135.038 15.997%
Other liabilities 23.163 23.510 10.768 9.298 33.931 32.808 3.423%
Total liabilities 106.296 110.020 84.275 57.826 190.571 167.846 13.539%
Net assets:
Invested in capital assets,
net of debt 158.411 141.069 28.718 38.599 187.129 179.668 4.153%
Restricted 64.855 85.745 36.639 27.423 101.494 113.168 - 10.316%
Unrestricted
Other unrestricted net assets 39.584 29.809 55.294 52.654 94.878 82.463 15.055%
Total net assets 262.850 256.623 120.651 118.676 383.501 375.299 2.185%
The largest portion ( 49%) of the City’s net assets reflects its capital assets ( e. g., land, buildings, machinery, and
equipment) less any related debt used to acquire those assets that is still outstanding. The City uses these capital
assets to provide services to residents; accordingly, these assets are not available for future spending. Although the
City’s investment in capital assets is reported net of related debt, it should be noted that the resources needed to
repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate
these liabilities.
An additional portion of the City’s net assets ( 26%) represents resources that are subject to external restrictions on
how they may be used. The remaining balance of unrestricted net assets ($ 94.878 million) may be used to meet the
government’s ongoing obligations ( although portions of these unrestricted net assets may by law or contract be only
used for specified purposes and may not necessarily be used for any general governmental purpose) to residents and
creditors.
At the end of the current fiscal year, the City is able to report positive balances in all three categories of net assets,
both for the government as a whole, as well as for its separate governmental and business- type activities. The same
situation held true for the prior fiscal year.
The City’s net assets increased by $ 8.2 million during the current fiscal year.
MANAGEMENT’S DISCUSSION AND ANALYSIS
7
Changes in City’s Net Assets ( in Millions)
Governmental Business- type
Activities Activities Total
2006 2005 2006 2005 2006 2005 Variance
Revenues $ $ $ $ $ $
Program revenues:
Community development 3.948 12.567 3.948 12.567 - 68.584%
Human Services 0.342 0.370 0.342 0.370 - 7.568%
Public safety 5.287 5.723 5.287 5.723 - 7.618%
Transportation 7.690 13.256 7.690 13.256 - 41.989%
Environmental support and protection 2.086 2.095 2.086 2.095 - 0.430%
Leisure, cultural and information services 5.046 4.710 5.046 4.710 7.134%
Policy development and implementation 0.911 0.810 0.911 0.810 12.469%
Water 18.705 16.311 18.705 16.311 14.677%
Sewer 11.773 10.274 11.773 10.274 14.590%
Parking 0.607 0.551 0.607 0.551 10.163%
Port of Redwood City 6.255 5.951 6.255 5.951 5.108%
General revenues:
Taxes/ special assessments 72.530 65.853 0.050 0.034 72.580 65.887 10.158%
Investment earnings 3.321 2.432 2.058 0.951 5.379 3.383 59.001%
Other 1.751 1.774 0.003 1.751 1.777 - 1.463%
Total revenues 102.912 109.590 39.448 34.075 142.360 143.665 - 0.908%
Expenses
Community development 15.653 13.922 15.653 13.922 12.434%
Human services 1.280 1.261 1.280 1.261 1.507%
Public safety 41.264 39.677 41.264 39.677 4.000%
Transportation 9.684 10.008 9.684 10.008 - 3.237%
Environmental support and protection 3.715 2.804 3.715 2.804 32.489%
Leisure, cultural and information services 18.880 18.186 18.880 18.186 3.816%
Policy development and implementation 2.647 2.600 2.647 2.600 1.808%
Interest on long term debt 3.600 3.703 3.600 3.703 - 2.782%
Water 19.847 16.692 19.847 16.692 18.901%
Sewer 12.785 12.742 12.785 12.742 0.337%
Parking 0.596 0.458 0.596 0.458 30.131%
Port of Redwood City 4.207 4.468 4.207 4.468 - 5.842%
Total expenses 96.723 92.161 37.435 34.360 134.158 126.521 6.036%
Change in net assets before transfers 6.189 17.429 2.013 ( 0.285) 8.202 17.144 - 52.158%
T ransfers 0.038 0.035 ( 0.038) ( 0.035)
Change in net assets 6.227 17.464 1.975 ( 0.320) 8.202 17.144 - 52.158%
Net assets - July 1 256.623 239.159 118.676 118.996 375.299 358.155 4.787%
Net assets - June 30 262.850 256.623 120.651 118.676 383.501 375.299 2.185%
GOVERNMENTAL ACTIVITIES
Governmental activities increased the City’s net assets by $ 6.2 million, thereby accounting for 76% of the total
growth in the City’s net assets. Key elements of this increase are as follows:
Key elements of the increase/ decrease in revenues for governmental activities are as follows:
General governmental revenues increased about 10.8%, or $ 7.543 million from FY 2004/ 05 due primarily to
increases in tax revenues.
Community development revenues decreased due to the one time receipt of $ 8 million of developer contributions
related to the public underground parking garage in FY 2004/ 05.
MANAGEMENT’S DISCUSSION AND ANALYSIS
8
Public safety revenues were lower in FY 2005/ 06 due to a decrease in grant revenue. Transportation revenues
decreased due to contributions from property owners for street improvements and grants ($ 4.7 million) in FY
2004/ 05 for the Shores Transportation Improvement District which was nearing completion in FY 2005/ 06, thereby
resulting in less revenue. Leisure, cultural and information services increased primarily due to an increase in grant
revenue for Library and Parks, Recreation and Community Services.
Key elements of the increase/ decrease in expenses for governmental activities are as follows:
Total expenses were up 4.9% or $ 4.562 million due mostly to increases in community development, public safety,
environmental support and protection, and leisure, cultural and information services, offset by a decline in
transportation expenses. Community development expenses increased $ 1.7 million primarily due to a donation of
land held for development for the El Camino/ Vera affordable housing project to the First Community Housing
along with a monetary grant for the Cedar Street affordable housing project to the Mental Health Association of
San Mateo County. The increase in public safety expenses was driven for the most part by higher salary and
benefit costs, while environmental support and protection were higher because of increased expenses related to the
lagoon intake facility project. Leisure, cultural and information services expenses increased primarily due to higher
salary and benefit costs along with increased after school grant program expenses, which was offset by increased
grant revenue. Transportation expenses declined due to decreased expenses related to the street pavement
management program.
BUSINESS- TYPE ACTIVITIES
Business- type activities increased the City’s net assets by $ 2 million in FY 2005/ 06.
Key elements accounting for increases or decreases in revenues and expenses are as follows:
Business- type revenues were higher in FY 2005/ 06 than the previous year as the increase in utility rates increased
revenues. Investment earnings increased significantly due to the interest earned on proceeds of water revenue
bonds ( the second of a series of five bond issues to be issued over a five year period) issued in FY 2005/ 06 along
with increased cash for the Port.
The water utility’s expenses were significantly higher (+ 18.9%) in FY 2005/ 06 primarily due to increases in the
distribution system replacement program, the recycled water program, and the water conservation program in FY
2005/ 06.
The expenses of the parking fund increased 30.1% mainly due to the new parking facility operations program set up
to account for the operation costs associated with the new downtown underground parking garage.
The Port of Redwood City experienced a 5.8% decrease in expenses due to decreased operating expenses.
FINANCIAL ANALYSIS OF THE CITY’S FUNDS
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance- related legal
requirements.
Governmental Funds
The general government functions are contained in the general, special revenue, debt service, and capital project
funds. The focus of the City’s governmental funds is to provide information on near- term inflows, outflows, and
balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In
particular, unreserved fund balance may serve as a useful measure of the City’s net resources available for spending
at the end of the fiscal year.
At June 30, 2006, the City’s governmental funds reported combined fund balances of $ 125.5 million, which is a
decrease of $ 14 million from the restated ( to reverse our accrual of sick leave and vacation) beginning year balance
of $ 139.5 million. This decrease was primarily due to the spending of the proceeds of bonds the Redevelopment
Agency issued in FY 2003/ 04 in connection with downtown revitalization efforts.
MANAGEMENT’S DISCUSSION AND ANALYSIS
9
Governmental fund revenues decreased $ 6.5 million this year to $ 101.9 million. An increase in the general fund
revenues was offset by decreases in the redevelopment agency fund and the Shores Transportation Improvement
District fund. Expenditures, including capital outlay, decreased $ 5.6 million this year to $ 115.6 million. Most of
the decrease was attributable to higher capital outlay expenditures in FY 2004/ 05 as the City purchased land for the
public underground parking garage. This decrease was partially offset in FY 2005/ 06 by increased capital outlay
expenditures for the Courthouse Plaza project along with other downtown improvements including parking and
streetscape.
The general fund is the primary operating fund of the City. At June 30, 2006, unreserved fund balance of the
general fund was $ 39.3 million of which $ 21.9 million is available for subsequent years’ expenditures while total
fund balance increased to $ 43.1 million from a restated beginning fund balance of $ 40 million. As a measure of the
general fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total
fund expenditures. Unreserved fund balance represents 59% of total fund expenditures, while total fund balance
represents 64% of that same amount. The fund balance of the City’s general fund increased by $ 3.1 million during
the current fiscal year.
The following are the major funds that qualified under the reporting criteria for major funds selection:
General Fund - General fund revenues increased approximately $ 7 million this fiscal year due to increases in
property taxes and sales and other taxes offset by decreases in other revenue categories. Property taxes increased
$ 6.3 million primarily due to the shift by the state in calculating motor vehicle license fees from a per capita basis
to a method based on property assessed value growth. This change resulted in a reclassification of most of the
motor vehicle license fees from intergovernmental revenues to property tax. Property tax also increased as assessed
valuations rose 4.77%, reflecting continued development in the City and increased prices for existing residential
properties, along with increased reimbursement from San Mateo County for prior year payments to the Education
Revenue Augmentation Fund. The general fund received a payment of $ 3.4 million from the County as its share of
the Educational Revenue Augmentation Fund ( ERAF) rebate in FY 2005/ 06.
ERAF, which was created by state law in the early 1990’ s, allowed the state to shift on an ongoing basis a portion
of each city, county, and special district’s property taxes to school districts. This shift allowed the state to decrease
the state’s general fund support to schools throughout the state and concomitantly reduced state funding of schools.
Within each county, ERAF revenues are allocated to schools based upon a formula that considers, among several
factors, the average daily attendance and the amount of each school district’s own property tax revenue. Within
San Mateo County, the outcome of applying this formula was that the school districts did not require all of the
funds shifted from the cities, county, and special districts. Consequently, these funds were returned to each entity
in proportion to the amount that was initially collected. Gross property tax revenue actually increased $. 5 million,
but this increase was offset by a $ 1.5 million takeaway by the state. FY 2005/ 06 was the second of two fiscal years
in which property taxes were shifted from cities and counties to the state. Redwood City’s total share of this shift
was $ 1.5 million for each of the two years.
General fund expenditures increased $ 3.3 million due to increased public safety expenditures as a result of higher
salaries and benefits in the amount of $ 2 million and increased salaries and benefits of the parks, recreation, and
library programs in the amount of $. 7 million offset by budget reductions in various City programs. Total
expenditures were less than budgeted and represented an increase of 5.3% in FY 2005/ 06, to a total of $ 66.9
million.
Transfers out of the general fund increased $. 9 million in FY 2005/ 06 resulting from increased transfers out for debt
service, capital projects, and a one- time legal settlement.
Capital Outlay Fund - This fund accounts for resources provided to finance general governmental capital projects.
In FY 2005/ 06, the capital outlay fund generated $ 1.1 million in revenue, most of which was from interest and
intergovernmental grants. This fund was also the recipient of $ 5.9 million of transfers from the general fund and
$ 3.1 million of transfers from the Redevelopment Agency to reimburse the City for prior year expenditures related
to the purchase of land for the public underground parking garage. Total outlays were $ 8.2 million of which $ 3.6
million met with City’s criteria for capitalization. The balance ($ 4.6 million) was expended in FY 2005/ 06. Total
MANAGEMENT’S DISCUSSION AND ANALYSIS
10
outlays in the prior year ( FY 2004/ 05) were $ 20.3 million. All of the capital outlay fund’s $ 28.6 million fund
balance is reserved or designated for specific capital projects.
Redevelopment Agency Fund – This fund accounts for resources provided to finance the City’s Redevelopment
Agency, a separate legal entity organized pursuant to the community redevelopment law of the Health and Safety
Code of the State of California. The City Council also serves on the Board of Directors of the Redevelopment
Agency. The Redevelopment Agency’s fund balance decreased by $ 14.2 million primarily due to the expenditure
of proceeds of bonds issued for the downtown revitalization efforts in FY 2003/ 04 and the transfer out to the capital
outlay fund for reimbursement of prior year expenditures related to the downtown revitalization.
Proprietary Funds
Enterprise fund net assets totaled $ 120.6 million at the end of the fiscal year, an increase of $ 2 million over the
prior year. Enterprise operating revenues were $ 37.9 million this year, an increase of $ 3.8 million from last year,
while net non- operating revenues ( expenses) were $(. 5) million compared to $(. 9) million the prior year.
Enterprise fund operating expenses were $ 35.6 million this year, up $ 2.2 million from the prior year, most of which
was due to higher operating expenses in the water and Port of Redwood City funds.
Water Utility - Net assets of the water utility fund increased $. 4 million in the current year to a total of $ 47.1
million.
Sewer Utility - The sewer utility fund incurred an operating loss of $. 3 million in the current year, down from the
operating loss of $ 1.4 in the prior year. Revenues increased by $ 1.2 million while expenses increased $ 43,000 over
the prior year. Non- operating revenues ( expenses) increased by $. 2 million this year as a result of a smaller
decrease in the value of the City’s investment in the South Bayside System Authority.
Parking Fund - Operating revenues decreased by $ 7,000 this year to $ 438,000, while operating expenses increased
to $ 536,000, an increase of $ 116,000. Capital contributions increased from $ 104,888 in FY 2004/ 05 to $ 169,231 in
FY 2005/ 06 primarily as a result of increased capital contributions in the current year from the Redevelopment
Agency.
Port Fund - Operating revenues were up 4.7% while operating expenses were down 5.6% from FY 2004/ 05.
Interest income increased 113% from $ 197,000 to $ 420,000. Overall, net assets increased from $ 32 million to
$ 34.5 million, or 7.7%.
GENERAL FUND BUDGETARY HIGHLIGHTS
Property taxes exceeded budget by $ 3.4 million primarily due to the receipt of a $ 3.4 million payment from the
County of San Mateo due to the over- deduction of Education Revenue Augmentation Fund amounts from the City
in prior years, which exceeded the estimated amount by $ 2.4 million. Additionally, the property tax in lieu of
vehicle license fees in the amount of $ 4.8 million exceeded the $ 4 million budget.
Sales and other taxes exceeded budget by $ 2.6 million mostly due to better than anticipated sales tax revenue ($. 6
million), higher utility users’ taxes ($ 1 million), transient occupancy taxes ($ 0.3 million), and property transfer tax
($. 3 million).
Intergovernmental revenue exceeded budget by $ 1.6 million due to the unanticipated $ 1.3 million receipt from the
state for motor vehicle in lieu fees not paid by the state in 2003.
Charges for services were $. 5 million less than budgeted primarily due to planning services revenue which did not
meet the City’s expectations.
Expenditures, overall, were $ 1 million less than budgeted as departments exercised greater fiscal restraint with
discretionary expenditures because of the City’s difficult financial condition.
MANAGEMENT’S DISCUSSION AND ANALYSIS
11
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets - At the end of FY 2005/ 06, the City had $ 302.4 million, net of depreciation, invested in a broad
range capital assets used in governmental and business- type activities, as shown in the table below. Additional
information on the City’s capital assets can be found in Note 4 and Note 16 of this report.
Capital Assets at Year- end ( in Millions)
Governmental Business- Type
Activities Activities Total
2006 2005 2006 2005 2006 2005 Variance
$ $ $ $ $ $
Land 27.775 27.775 3.448 3.448 31.223 31.223 0.000%
Streets 64.592 64.592 64.592 64.592 0.000%
Construction in progress 80.528 60.090 31.354 26.217 111.882 86.307 29.633%
Buildings 56.403 56.024 10.243 9.498 66.646 65.522 1.715%
Equipment 17.570 15.848 2.112 2.303 19.682 18.151 8.435%
Improvements 79.275 79.125 79.275 79.125 0.190%
Harbor improvements 3.302 3.299 3.302 3.299 0.091%
Parks, bridges, etc. 20.989 20.989 20.989 20.989 0.000%
Traffic signals 2.138 1.968 2.138 1.968 8.638%
Storm drains 7.123 7.123 7.123 7.123 0.000%
Less accumulated depreciation ( 63.993) ( 58.222) ( 40.426) ( 38.407) ( 104.419) ( 96.629) 8.062%
Total capital assets 213.125 196.187 89.308 85.483 302.433 281.670 7.371%
Governmental Activities
The substantial ( 34%) increase in Construction in Progress is driven by Redevelopment Agency construction
projects in connection with downtown revitalization efforts. Buildings increased due to renovations completed on
the Community Activities Building. Equipment increased primarily due to the acquisition of two fire pumper
trucks. Traffic signals increased due to the installation of a new traffic signal at Veterans and Middlefield Road.
Business- Type Activities
The $ 5.1 million increase in Construction in Progress resulted primarily from the recycled water project. The
buildings increased by $. 7 million due to extensive remodeling completed at the Municipal Services Center.
Long- Term Debt - Issues described in detail in Notes 6 and 7 to Financial Statements. During FY 2005/ 06 the
City’s Public Financing Authority issued $ 26 million of water revenue bonds.
Outstanding Debt ( in Millions)
Governmental Business- Type
Activities Activities Total
2006 2005 2006 2005 2006 2005 Variance
$ $ $ $ $ $
Revenue bonds 26.794 28.834 70.775 45.815 97.569 74.649 30.704%
General improvement bonds 2.305 4.005 2.305 4.005 - 42.447%
Tax increment bonds 45.780 45.694 45.780 45.694 0.188%
Loans 0.296 0.339 1.952 1.975 2.248 2.314 - 2.852%
Accrued sick leave and vacation 7.958 7.638 0.780 0.738 8.738 8.376 4.322%
Total long term debt 83.133 86.510 73.507 48.528 156.640 135.038 15.997%
MANAGEMENT’S DISCUSSION AND ANALYSIS
12
SPECIAL ASSESSMENT DISTRICT DEBT
Special assessment districts in different parts of the City have also issued debt to finance infrastructure and facilities
construction in their respective districts.
At June 30, 2006, a total of $ 33.4 million in special assessment district debt was outstanding, issued by three
special assessment districts. This debt is secured only by special assessments on the real property in the district
issuing the debt, and is not the City’s responsibility, although the City does act as these Districts’ agent in the
collection and remittance of assessments.
ECONOMIC OUTLOOK AND MAJOR INITIATIVES
Redwood City is a 34 square mile community at an elevation of 25 feet which is located on the west shore of the
San Francisco Bay peninsula midway between San Francisco ( 25 miles to the north) and San Jose ( 17 miles to the
south).
The number of jobs in San Mateo County remains well below the levels reached before the 2001 recession. As of
June 30, 2001 there were an estimated 420,100 jobs in San Mateo County while as of June 30, 2006 there were an
estimated 348,000 jobs. All quoted job numbers are from the State of California Employment Development
Department and are not seasonally adjusted.
The economic recession that the nation entered into in the spring of 2001 has been experienced locally as well.
Given the San Francisco Bay Area’s reliance upon technology and related industries, this slowdown has had a
marked impact on several of the City’s revenues that are sensitive to the level of business activity occurring in the
surrounding area. While revenues have shown recent improvement, sales tax, the general fund’s second largest
revenue source, remains below the level it reached in FY 2000/ 01. In year- to- year comparisons from FY 2004/ 05
to FY 2005/ 06, sales tax revenues have increased 8.6% from $ 16.5 million to $ 17.9 million, transient occupancy
taxes have increased 13% from $ 2.3 million to $ 2.6 million, while development- related revenues have increased
29% from $ 1.7 million in FY 2004/ 05 to $ 2.2 million in FY 2005/ 06.
Redwood City’s sales tax revenue has been significantly affected by local software development firms delivering
more of their products electronically. Under California state law, sales and use tax applies to the purchase or
consumption of tangible personal property. The State Board of Equalization, the regulatory authority that oversees
the state’s sales and use tax laws, has adopted a regulation that exempts electronically delivered canned software
from the sales and use taxes. Software that is delivered via a tangible medium ( CD or tape) is, however, subject to
sales and use taxes.
According to information published by NAI BT Commercial Real Estate, the vacancy rate for commercial office
space in San Mateo County was 16.1% as of September 30, 2006. By comparison, in 1999 the vacancy rate for
commercial office space was 1.2%. Redwood City currently had over 1.4 million square feet of vacant office space
out of a total inventory of 9.9 million square feet as of September 30. City staff is confident that Redwood City
will prosper in the coming years as the technology industry expands.
Although technology companies ( such as Informatica, Broadvision, Electronic Arts, and Oracle) are a substantial
component of the City’s economy, other sectors provide important economic support. In addition to the technology
sector, we have manufacturing ( Tyco Electronics), biotechnology ( Maxygen, Abbot Vascular Devices, and
Genelabs), auto dealers ( both domestic and foreign), building materials, two hospitals ( Kaiser and Sequoia), a
University of California extension campus, a community college ( Cañada), a high school ( Sequoia), and a variety
of retailers ( Costco, K- Mart, Mervyns, and Target). The Port of Redwood City is the only deep- water port on the
San Francisco Bay south of San Francisco, serving the entire region as a key entry point for many types of materials
contributing to the local economy. Redwood City is also the county seat for San Mateo County, which results in a
high daytime population from people conducting matters at the county offices and courts.
MANAGEMENT’S DISCUSSION AND ANALYSIS
13
The Oracle Corporation, a leading database developer, maintains its world headquarters in Redwood City. Oracle
presently has over 8,000 employees in Redwood City and occupies 1.5 million square feet of commercial office
space. Broadvision, Electronic Arts, Informatica, and a number of other technology companies have also selected
Redwood City as the site for their world headquarters.
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 the Finance
Department, at 1017 Middlefield Road, Redwood City, CA 94063
14
City of Redwood City
Comprehensive Annual Financial Report
June 30, 2006
15
STATEMENT OF NET ASSETS AND STATEMENT OF ACTIVITIES
The Statement of Net Assets and the Statement of Activities are statements required by Governmental
Accounting Standards Board Statement No. 34. Their purpose is to 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 of accounting — 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 the City’s governmental activities in a
single column, and the financial position of all City 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.
The format of the Statement of Activities differs considerably from those used in the past. It presents the
City’s expenses first, listed by program, and follows these with the expenses of its business- type
activities. Program revenues — that is, revenues which are generated directly by these programs — are
then deducted from program expenses to arrive at the net expense of each governmental and business-type
activity. The City’s general revenues are then listed in the governmental activities or business- type
activities column, as appropriate, and the Change in Net Assets is computed and reconciled with the
Statement of Net Assets.
Both these statements include the financial activities of the City and the Redevelopment Agency of the
City of Redwood City, which is legally separate but is a component unit of the City because it is
controlled by the City, which is financially accountable for the Agency’s activities.
These financial statements along with the fund financial statements and footnotes are called Basic
Financial Statements; the term General Purpose Financial Statement is no longer used.
CITY OF REDWOOD CITY, CALIFORNIA
STATEMENT OF NET ASSETS
JUNE 30, 2006
Governmental Business- Type
Activities Activities Total
$ $ $
ASSETS
Cash and investments available for operations 93,540,042 30,308,529 123,848,571
Cash and investments, restricted 31,280,130 42,818,360 74,098,490
Receivables ( net of allowance for uncollectibles):
Taxes and assessments - current 6,463,922 6,463,922
Accounts 1,369,270 3,032,063 4,401,333
Loans 14,356,421 14,356,421
Accrued interest 1,443,716 245,857 1,689,573
Due from other governmental agencies 2,829,242 970,360 3,799,602
Inventory of supplies at cost 241,270 241,270
Deposits 673,103 2,291 675,394
Prepaid expenses 311,875 311,875
Investment in land held for redevelopment 2,271,471 2,271,471
Capital assets:
Nondepreciable 108,302,917 34,802,273 143,105,190
Depreciable buildings, property, equipment and infrastructure, net 104,821,685 54,506,416 159,328,101
Unamortized bond discounts & issuance costs 1,552,805 1,895,461 3,448,266
Investment in sewer authority 17,154,901 17,154,901
Investment in sewage capacity rights 2,559,184 2,559,184
Advances to South Bayside System Authority 16,317,881 16,317,881
Total assets 369,145,994 204,925,451 574,071,445
LIABILITIES
Accounts payable 6,500,740 5,105,319 11,606,059
Accrued interest payable 782,621 1,013,478 1,796,099
Accrued payroll 1,358,733 1,358,733
Deposits payable 4,287,812 279,821 4,567,633
Insurance claims payable 8,900,222 8,900,222
Unearned revenue 1,332,664 168,326 1,500,990
Environmental liability 4,200,000 4,200,000
Accrued sick leave and vacation:
Due in one year 308,582 395,896 704,478
Due in more than one year 7,649,760 384,442 8,034,202
Long- Term Debt:
Due in one year 4,853,378 1,564,292 6,417,670
Due in more than one year 70,321,490 71,163,059 141,484,549
Total liabilities 106,296,002 84,274,633 190,570,635
NET ASSETS
Invested in capital assets, net of related debt 158,410,981 28,718,115 187,129,096
Restricted for:
Capital projects 36,737,750 31,643,418 68,381,168
Debt service 6,279,693 4,995,366 11,275,059
Community development projects 18,530,676 18,530,676
Other purposes 3,307,194 3,307,194
Total restricted net assets 64,855,313 36,638,784 101,494,097
Unrestricted net assets 39,583,698 55,293,919 94,877,617
Total net assets 262,849,992 120,650,818 383,500,810
See accompanying notes to financial statements
16
CITY OF REDWOOD CITY, CALIFORNIA
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2006
Net ( Expense) Revenue and
Program Revenues Changes in Net Assets
Operating Capital
Overhead Charges for Grants and Grants and Governmental Business- Type
Functions/ Programs Expenses Charges Services Contributions Contributions Activities Activities Total
$ $ $ $ $ $ $ $
Governmental Activities:
Community development 15,457,115 196,094 1,984,721 1,558,345 404,756 ( 11,705,387) ($ 11,705,387)
Human services 1,279,535 341,672 ( 937,863) ( 937,863)
Public safety 41,264,413 1,836,985 1,171,888 2,277,599 ( 35,977,941) ( 35,977,941)
Transportation 9,683,728 161,112 1,483,418 6,046,237 ( 1,992,961) ( 1,992,961)
Environmental support and protection 3,697,361 17,822 1,210,222 875,534 ( 1,629,427) ( 1,629,427)
Leisure, cultural and information services 18,852,430 27,403 3,023,953 1,621,569 399,757 ( 13,834,554) ( 13,834,554)
Policy development and implementation 4,037,610 ( 1,390,737) 583,237 160,859 166,901 ( 1,735,876) ( 1,735,876)
Interest on long term debt 3,599,533 ( 3,599,533) ( 3,599,533)
Total Governmental Activities 97,871,725 ( 1,149,418) 8,800,230 6,337,751 10,170,784 ( 71,413,542) ( 71,413,542)
Business- Type Activities:
Water Utility Fund 19,194,738 652,063 18,704,466 ( 1,142,335) ( 1,142,335)
Sewer Utility Fund 12,330,711 454,332 11,685,917 86,596 ( 1,012,530) ( 1,012,530)
Parking Fund 552,536 43,023 438,284 169,231 11,956 11,956
Port of Redwood City 4,207,224 6,228,789 25,573 2,047,138 2,047,138
Total Business- Type Activities 36,285,209 1,149,418 37,057,456 281,400 ( 95,771) ( 95,771)
Total 134,156,934 45,857,686 6,337,751 10,452,184 ( 71,413,542) ( 95,771) ( 71,509,313)
General revenues:
Taxes:
Property taxes 36,256,452 50,583 36,307,035
Sales taxes 17,902,816 17,902,816
Other taxes 18,370,347 18,370,347
Investment Earnings 3,321,134 2,058,075 5,379,209
Other 1,751,381 1,751,381
Transfers 38,310 ( 38,310)
Total general revenues and transfers 77,640,440 2,070,348 79,710,788
Change in Net Assets 6,226,898 1,974,577 8,201,475
Net Assets- Beginning 256,623,094 118,676,241 375,299,335
Net assets- Ending 262,849,992 120,650,818 383,500,810
See accompanying notes to financial statements
17
City of Redwood City
Comprehensive Annual Financial Report
June 30, 2006
18
19
GOVERNMENTAL 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 groups of accounts.
The governmental funds described below were determined to be major funds by the City in fiscal year
2005/ 06.
GENERAL FUND
The general fund is the general operating fund of the City. It is used to account for all financial resources
except those to be accounted for in another fund.
CAPITAL OUTLAY FUND
This fund accounts for all miscellaneous capital improvement projects that are financed by the general
fund.
REDEVELOPMENT AGENCY FUND
This fund accounts for funds to be provided by loans and/ or property tax increment from specific
redevelopment areas for redevelopment projects within those areas.
CITY OF REDWOOD CITY, CALIFORNIA
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2006
Capital Redevelopment Non- Major Total
General Outlay Agency Governmental Governmental
Fund Fund Fund Funds Funds
$ $ $ $ $
ASSETS
Cash and investments available for operation 39,791,713 13,110,766 2,544,776 23,654,232 79,101,487
Cash and investments, restricted 11,640,416 4,488,834 15,150,880 31,280,130
Receivables ( net of allowance for uncollectibles)
Taxes and assessments - curren 6,243,796 220,126 6,463,922
Accounts 1,325,284 922 31,719 1,357,925
Loans 2,980,790 2,050,000 1,257,778 8,067,853 14,356,421
Accrued interest 847,044 36,813 81,559 107,759 1,073,175
Due from other governmental agencie 821,242 201,493 1,692,212 2,714,947
Inventory of supplies at cos 1,409 1,409
Advances to other funds 3,176,887 3,176,887
Deposits 377,500 377,500
Investment in land held for redevelopmen 293,106 1,978,365 2,271,471
Total Assets 52,011,278 30,217,297 8,666,053 51,280,646 142,175,274
LIABILITIES
Accounts payable 2,077,942 1,289,594 1,537,142 1,328,495 6,233,173
Accrued payroll 1,358,733 1,358,733
Deposits payable 4,132,178 87,530 2,979 65,125 4,287,812
Deferred revenue 46,958 176,887 63,151 286,996
Unearned revenue 1,253,436 25,402 1,278,838
Advances from other funds 3,176,887 3,176,887
Accrued sick leave and vacation 3,345 3,345
Total Liabilities 8,872,592 1,554,011 4,717,008 1,482,173 16,625,784
FUND BALANCES
Reserved for:
Encumbrances 640,299 5,009,454 3,895,978 1,581,091 11,126,822
Loans 2,980,790 2,050,000 1,257,778 7,809,226 14,097,794
Land held for redevelopmen 293,106 1,978,365 2,271,471
Low income housing 1,283,688 1,283,688
Inventory 1,409 1,409
Prepaid expenditures
Advances to other funds 3,000,000 3,000,000
Debt service 7,097,571 7,097,571
General reserve 250,000 250,000
Unreserved, reported in
General fund 39,266,188 39,266,188
Special revenue funds ( 1,497,817) 19,372,854 17,875,037
Debt service funds ( 50,285) ( 50,285)
Capital projects funds 18,603,832 10,725,963 29,329,795
TOTAL FUND BALANCES 43,138,686 28,663,286 3,949,045 49,798,473 125,549,490
Total Liabilities and Fund Balances 52,011,278 30,217,297 8,666,053 51,280,646 142,175,274
See accompanying notes to financial statement
20
CITY OF REDWOOD CITY, CALIFORNIA
RECONCILIATION OF THE
GOVERNMENTAL FUNDS - BALANCE SHEET
WITH THE STATEMENT OF NET ASSETS
JUNE 30, 2006
$
TOTAL FUND BALANCES -- TOTAL GOVERNMENTAL FUNDS 125,549,490
Amounts reported for Governmental Activities in the Statement o
Net Assets are different from those reported in the Governmental Funds above because of the followin
CAPITAL ASSETS
Capital assets used in Governmental Activities are not current assets or financial resources and therefore are n 207,095,300
reported in the Governmental Funds
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 activiti
such as insurance and central services and maintenance, to individual governmental funds. The assets and liabilities of th
Internal Service Funds are therefore included in Governmental Activities in the Statement of Net Asse 11,095,665
ACCRUAL OF NON- CURRENT REVENUES AND EXPENSES
The amounts below are revenues in the statement of activities that do not provide current financial resources and therefo
are not reported as revenues in the Funds
Interest revenue 370,541
Deferred revenue 286,996
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 Fun
Unamortized bond discounts and issuance cost 1,552,805
Long- term debt ( 75,174,868)
Interest payable ( 782,621)
Accrued sick leave and vacation ( 7,143,316)
NET ASSETS OF GOVERNMENTAL ACTIVITIES 262,849,992
See accompanying notes to financial statement
21
CITY OF REDWOOD CITY, CALIFORNIA
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
FOR THE YEAR ENDED JUNE 30, 2006
Capital Redevelopment Non- Major Total
General Outlay Agency Governmental Governmental
Fund Fund Fund Funds Funds
$ $ $ $ $
REVENUES
Property taxes/ special assessments 27,882,166 6,510,190 5,000,293 39,392,649
Sales and other taxes 32,954,880 32,954,880
Licenses and permits 1,167,735 1,167,735
Fines, forfeitures and penalties 605,746 343,112 948,858
Use of money and property 1,788,540 754,379 470,739 3,486,168 6,499,826
Intergovernmental 5,811,357 416,772 7,275,798 13,503,927
Contributions 28,691 153,801 182,492
Charges for current services 6,050,701 1,270 6,051,971
Other 912,273 11,644 269,203 1,193,120
Total Revenues 77,202,089 1,171,151 6,992,573 16,529,645 101,895,458
EXPENDITURES
Current Operations:
Community development 7,059,179 243,538 4,356,341 3,915,284 15,574,342
Human services 1,195,315 1,195,315
Public safety 40,202,968 248,155 180,657 40,631,780
Transportation 151,873 2,695,497 3,446,660 6,294,030
Environmental support and protection 212,921 890,309 2,596,148 3,699,378
Leisure, cultural and information services 16,649,006 187,267 8,060 16,844,333
Policy development and implementation 1,384,769 319,776 1,704,545
Capital outlay 54,456 3,617,455 12,104,033 6,565,997 22,341,941
Debt service:
Principal retirement 42,321 4,845,000 4,887,321
Interest and fiscal charges 2,426,923 2,426,923
Total Expenditures 66,910,487 8,201,997 16,502,695 23,984,729 115,599,908
EXCESS ( DEFICIENCY) OF REVENUES
OVER EXPENDITURES 10,291,602 ( 7,030,846) ( 9,510,122) ( 7,455,084) ( 13,704,450)
OTHER FINANCING SOURCES ( USES)
Transfers in 1,119,973 9,029,693 4,795,503 14,945,169
Transfers ( out) ( 8,328,529) ( 1,716,324) ( 4,643,950) ( 545,851) ( 15,234,654)
Sale of property 5,100 5,100
Total Other Financing Sources ( Uses) ( 7,203,456) 7,313,369 ( 4,643,950) 4,249,652 ( 284,385)
NET CHANGE IN FUND BALANCES 3,088,146 282,523 ( 14,154,072) ( 3,205,432) ( 13,988,835)
Fund balances at beginning of period as restated 40,050,540 28,380,763 18,103,117 53,003,905 139,538,325
FUND BALANCES AT END OF PERIOD 43,138,686 28,663,286 3,949,045 49,798,473 125,549,490
See accompanying notes to financial statements
22
CITY OF REDWOOD CITY, CALIFORNIA
RECONCILIATION OF THE
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS
WITH THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2006
The schedule below reconciles the Net Changes in Fund Balances reported on the Governmental Funds Statement of Revenues, Expenditures and
Changes in Fund Balance, which measures only changes in current assets and current liabilities on the modified accrual basis, with the Change in
Net Assets of Governmental Activities reported in the Statement of Activities, which is prepared on the full accrual basis.
$
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS ( 13,988,835)
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. 22,341,941
Depreciation expense is deducted from the fund balance.
( Depreciation expense is net of internal service fund depreciation of
$ 850,493 which has already been allocated to serviced funds.) ( 5,286,053)
Retirements of capital assets ( 567,704)
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.
Repayment of debt principal is added back to fund balance. 4,887,321
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):
Change in compensated absences ( 252,183)
Interest payable 48,910
Interest accreted on capital appreciation debt ( 1,221,520)
Deferred loan revenue ( 540,695)
Amortization of bond premium 31,057
Amortization of issuance costs ( 67,976)
Interest receivable and intergovernmental revenue 399,299
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 443,336
CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES 6,226,898
See accompanying notes to financial statements
23
24
PROPRIETARY FUND FINANCIAL STATEMENTS
Enterprise 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 enterprise funds. The City has
identified all of its enterprise funds as major funds in fiscal year 2005/ 06.
GASB 34 does not provide for the disclosure of budget vs. actual comparisons regarding enterprise funds.
WATER UTILITY FUND
This fund is used to account for the provision of water services to the residents of Redwood City and
some residents of areas adjacent to the City. All activities necessary to provide such services are
accounted for in these funds, including, but not limited to, administration, operations, maintenance,
capital improvements, financing, and billing/ collections.
SEWER UTILITY FUND
This fund is used to account for the provision of sewer services to the residents of Redwood City and
some residents of areas adjacent to the City. All activities necessary to provide such services are
accounted for in these funds, including, but not limited to, administration, operations, maintenance,
capital improvements, financing, and billing/ collections.
PARKING FUND
This fund is used to account for on- street and off- street parking operations within the boundaries of the
central business district of the City. All activities necessary to provide metered parking within the district
are accounted for in these funds, including, but not limited to, administration, operations and
maintenance, capital improvements, meter collection, and financing including related debt service. The
authority for the formation of the district and the issuance of revenue bonds are contained in the State of
California’s Streets and Highway Code.
PORT OF REDWOOD CITY ( PORT FUND)
This fund is used to account for Port activities within the Port Department as defined in the City Charter.
These activities include, but are not limited to, administration, maintenance and operations, and Port
improvements. Management of the Port of Redwood City is provided by the Port Commission, whose
members are appointed for five- year terms by the City Council. The only limitation to the
commissioner’s authority is the power to levy taxes, which must be approved by the City Council. Also,
the City Charter provides that the City Treasurer is the Port Treasurer and the City Attorney is the Port
Attorney. This fund is included in this report because both the Bureau of Census and the State of
California require the City to include a summary of the Port’s financial transactions in the respective
reports.
INTERNAL SERVICE FUNDS
These funds are used to account for the financing of goods and services provided by one city department
to others on a cost reimbursement basis. Internal service funds are included with enterprise funds as both
use the same accounting and financial reporting.
CITY OF REDWOOD CITY, CALIFORNIA
PROPRIETARY FUNDS
STATEMENT OF NET ASSETS
JUNE 30, 2006
Business- Type Activities- Enterprise Funds Governmental
Water Sewer Activities-
Utility Utility Parking Port of Internal Service
Fund Fund Fund Redwood City Totals Funds
$ $ $ $ $ $
ASSETS
Current assets:
Cash and investments available for operations 14,927,492 1,320,610 1,073,780 12,986,647 30,308,529 14,438,555
Receivables ( net of allowance for uncollectibles):
Accounts 1,516,775 662,347 2,427 850,514 3,032,063 11,345
Accrued interest 245,857 245,857
Due from other governmental agencies 966,060 4,300 970,360 114,295
Inventory of supplies at cost 239,861
Deposits 2,291 2,291 295,603
Prepaid expenses 37,015 274,860 311,875
Total current assets 16,692,415 2,986,032 1,080,507 14,112,021 34,870,975 15,099,659
Noncurrent assets:
Cash and investments, restricted 41,335,456 1,482,904 42,818,360
Capital assets:
Nondepreciable 10,074,010 75,614 822,913 23,829,736 34,802,273
Depreciable buildings, property, equipment
and infrastructure, net 28,024,154 11,505,027 5,106,082 9,871,153 54,506,416 6,029,302
Unamortized bond discounts & issuance costs 1,381,819 513,642 1,895,461
Investment in sewer authority 17,154,901 17,154,901
Investment in sewage capacity rights 2,159,184 400,000 2,559,184
Advances to South Bayside System Authority 16,317,881 16,317,881
Total noncurrent assets 97,133,320 30,894,726 5,928,995 36,097,435 170,054,476 6,029,302
Total assets 113,825,735 33,880,758 7,009,502 50,209,456 204,925,451 21,128,961
LIABILITIES
Current liabilities:
Accounts payable 4,312,632 169,650 60,553 562,484 5,105,319 267,567
Deposits payable 112,210 14,403 153,208 279,821
Insurance claims payable 8,900,222
Accrued sick leave and vacation - current portion 179,925 93,531 4,642 117,798 395,896 305,237
Environmental liability 4,200,000 4,200,000
Revenue bonds payable - current portion 1,325,000 215,000 1,540,000
Loans/ leases payable - current portion 24,292 24,292
Unearned revenue 168,326 168,326 53,826
Accrued interest payable 944,412 69,066 1,013,478
Total current liabilities 6,874,179 263,181 79,598 5,510,174 12,727,132 9,526,852
Noncurrent liabilities:
Accrued sick leave and vacation 234,827 135,934 13,681 384,442 506,444
Revenue bonds payable 59,635,000 9,600,000 69,235,000
Loans payable 1,300,000 628,059 1,928,059
Total noncurrent liabilities 59,869,827 135,934 1,313,681 10,228,059 71,547,501 506,444
Total liabilities 66,744,006 399,115 1,393,279 15,738,233 84,274,633 10,033,296
NET ASSETS
Invested in capital assets,
net of related debt ( 6,543,955) 11,580,641 4,628,995 19,052,434 28,718,115 6,029,302
Restricted for capital projects 31,643,418 31,643,418
Restricted for debt service 3,749,854 1,245,512 4,995,366
Unrestricted 18,232,412 21,901,002 987,228 14,173,277 55,293,919 5,066,363
Total net assets 47,081,729 33,481,643 5,616,223 34,471,223 120,650,818 11,095,665
See accompanying notes to financial statements
25
CITY OF REDWOOD CITY, CALIFORNIA
PROPRIETARY FUNDS
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN FUND NET ASSETS
FOR THE YEAR ENDED JUNE 30, 2006
Business- Type Activities- Enterprise Funds Governmental
Water Sewer Activities-
Utility Utility Parking Port of Internal Service
Fund Fund Fund Redwood City Totals Funds
$ $ $ $ $ $
Operating Revenues:
Charges for services 18,704,466 12,533,680 438,284 6,228,789 37,905,219 14,316,383
Total Operating Revenues 18,704,466 12,533,680 438,284 6,228,789 37,905,219 14,316,383
Operating Expenses:
Employee services 3,973,238 1,995,295 214,314 1,081,299 7,264,146 6,372,608
Maintenance 1,943,136 612,986 29,766 87,497 2,673,385 2,006,241
Water purchases 5,688,021 5,688,021
Utilities 174,095 135,141 21,489 180,706 511,431 59,368
Contractual services 491,645 6,572,614 63,253 850,328 7,977,840 522,915
Supplies and services 5,412,974 3,056,415 106,189 777,871 9,353,449 1,351,732
Depreciation and amortization 967,250 412,592 101,229 671,309 2,152,380 850,493
Insurance and claims 3,493,328
Total Operating Expenses 18,650,359 12,785,043 536,240 3,649,010 35,620,652 14,656,685
Operating Income ( Loss) 54,107 ( 251,363) ( 97,956) 2,579,779 2,284,567 ( 340,302)
Nonoperating Revenues ( Expenses):
Gain ( loss) on disposal of equipment ( 6,137) ( 6,137) 16,223
Property taxes 50,583 50,583
Nonoperating grant revenue 25,573 25,573 22,000
Interest income 1,588,938 25,509 26,092 417,536 2,058,075 359,516
Interest expense ( 1,196,442) ( 59,319) ( 552,077) ( 1,807,838)
Increase ( decrease) in investment in sewer authority ( 847,763) ( 847,763)
Insurance recovery 35,878
Net Nonoperating Revenues ( Expenses) 392,496 ( 822,254) 17,356 ( 115,105) ( 527,507) 433,617
Net Income ( Loss) Before Capital Contributions
and Transfers 446,603 ( 1,073,617) ( 80,600) 2,464,674 1,757,060 93,315
Capital contributions 86,596 169,231 255,827 22,226
Transfers in 6,272 908 7,180 361,218
Transfers ( out) ( 31,490) ( 14,000) ( 45,490) ( 33,423)
Total Capital Contributions and Transfers ( 31,490) 78,868 170,139 217,517 350,021
Change in net assets 415,113 ( 994,749) 89,539 2,464,674 1,974,577 443,336
Total net assets- beginning 46,666,616 34,476,392 5,526,684 32,006,549 118,676,241 10,652,329
Total net assets- ending 47,081,729 33,481,643 5,616,223 34,471,223 120,650,818 11,095,665
See accompanying notes to financial statements
26
CITY OF REDWOOD CITY, CALIFORNIA
PROPRIETARY FUNDS
COMBINING STATEMENT OF CASH FLOWS
INCREASE ( DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Governmental
Water Sewer Activities -
Utility Utility Parking Port of Internal Service
Fund Fund Fund Redwood City Totals Funds
Cash flows from operating activities: $ $ $ $ $ $
Cash received from customers 18,465,472 11,975,808 433,182 5,892,964 36,767,426 14,355,870
Cash payments to suppliers for goods and services ( 10,668,223) ( 9,550,341) ( 120,681) ( 2,064,316) ( 22,403,561) ( 7,834,637)
Cash payments to employees for services ( 3,939,375) ( 2,001,481) ( 212,492) ( 1,068,278) ( 7,221,626) ( 6,308,228)
Right of way compensation ( 1,739,160) ( 1,122,008) ( 40,732) ( 2,901,900)
Net cash provided by operating activities 2,118,714 ( 698,022) 59,277 2,760,370 4,240,339 213,005
Cash flows from noncapital financing activities:
Insurance recovery 35,878
Property taxes 50,583 50,583
Transfers in 322,000
Transfers out ( 33,423)
Net cash provided by noncapital financing activities 50,583 50,583 324,455
Cash flows from capital and related financing activities:
Acquisition and construction of capital assets ( 4,658,849) ( 96,559) ( 3,404) ( 480,431) ( 5,239,243) ( 1,254,945)
Advances to South Bayside System Authority ( 11,939,763) ( 11,939,763)
Principal retirements ( 830,000) ( 232,791) ( 1,062,791)
Interest paid ( 1,312,586) ( 59,319) ( 546,567) ( 1,918,472)
Contributions 25,573 25,573 22,000
Unamortized issuance cost 3,735 3,735
Proceeds from sale of equipment 500 500 32,398
Bond proceeds 25,508,604 25,508,604
Payments for costs of issuance ( 168,714) ( 168,714)
Net cash used for capital and related financing activities 6,598,692 ( 96,559) ( 62,723) ( 1,229,981) 5,209,429 ( 1,200,547)
Cash flows from investing activities:
Interest and dividends on investment 1,504,079 25,509 26,092 417,536 1,973,216 359,516
Net increase ( decrease) in cash and cash equivalents 10,221,485 ( 769,072) 73,229 1,947,925 11,473,567 ( 303,571)
Cash and cash equivalents at beginning of year 46,041,463 2,089,682 1,000,551 12,521,626 61,653,322 14,742,126
Cash and cash equivalents at end of year 56,262,948 1,320,610 1,073,780 14,469,551 73,126,889 14,438,555
Reconciliation of Net Cash Flow from Operating Activities
Operating income ( loss) 54,107 ( 251,363) ( 97,956) 2,579,779 2,284,567 ( 340,302)
Adjustments to reconcile operating income to net cash
provided by operating activities:
Depreciation 967,250 412,592 101,229 671,309 2,152,380 850,493
Change in assets and liabilities:
Decrease ( increase) in accounts receivable ( 238,994) ( 97,727) ( 802) ( 337,069) ( 674,592) 16,025
Decrease ( increase) in due from other governmental agencies ( 460,145) ( 4,300) ( 464,445) ( 30,364)
Decrease ( increase) in inventory/ prepaid expenses/ deposit ( 357) ( 37,015) ( 83,756) ( 121,128) 2,872
Increase ( decrease) in vacation & sick leave payable 33,863 ( 6,186) 1,822 13,021 42,520 64,380
Increase ( decrease) in accounts payable 1,281,079 ( 258,178) 56,993 ( 81,668) 998,226 ( 350,427)
Increase ( decrease) in customer deposits 21,766 2,291 ( 2,490) 21,567
Increase ( decrease) in unearned revenue 1,244 1,244 53,826
Increase ( decrease) in insurance claims payable ( 53,498)
Total adjustments 2,064,607 ( 446,659) 157,233 180,591 1,955,772 553,307
Net cash provided by operating activities 2,118,714 ( 698,022) 59,277 2,760,370 4,240,339 213,005
See accompanying notes to financial statements
Non- cash financing activity: During the fiscal year the water utility fund transferred $ 25,218 and the sewer utility fund transferred $ 14,000 in capital assets to
internal service funds, and the water utility fund transferred $ 6,272 in capital assets to the sewer utility fund. Additionally, the parking fund received $ 908 in
capital assets from the internal service funds.
During the fiscal year the equipment services fund received $ 52,209 and the internal services fund received $ 9,235 in contributed capital assets which consisted
of new equipment purchased by governmental funds and enterprise funds.
27
CITY OF REDWOOD CITY
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET ASSETS
JUNE 30, 2006
Agency
Funds
$
ASSETS
Cash and Investments, restricted 8,168,679
Accrued Interest Receivable 4,519
Total Assets 8,173,198
LIABILITIES
Due to Bondholders 7,458,769
Employee Benefit Plans Payable 714,429
Total Liabilities 8,173,198
See accompanying notes to financial statements
28
29
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Reporting Entity
The accompanying basic financial statements present the financial activity of the City of Redwood City
( City), which is the primary government presented, along with the financial activities of its component
units, which are entities for which the City is financially accountable. Although they are separate legal
entities, blended component units are in substance part of the City’s operations and are reported as an
integral part of the City’s financial statements. This City’s component units which are described below
are all blended.
The City Council serves in separate session as the governing bodies of the Redwood City Redevelopment
Agency, the Redwood City Facilities and Infrastructure Authority, and the Public Financing Authority,
although these agencies are legal entities apart from the City. Under the City Charter, the City Council
appoints the Board of Port Commissioners who oversee the operations of the Port of Redwood City,
which is considered a department of the City.
The Redwood City Redevelopment Agency, Redwood City Facility and Infrastructure Authority, and
Public Financing Authority are included as component units in the accompanying financial statements.
The financial activities of the foregoing entities have been aggregated and merged ( termed “ blending”)
with those of the City in the accompanying financial statements, as each meets the criteria for inclusion as
set forth in Governmental Accounting Standards Board Statement No. 14. Information concerning the
Bay Cities Joint Powers Insurance Authority and South Bayside System Authority are presented in the
notes to the financial statements, as the City’s relationship to these organizations does not meet the
aforementioned criteria for presenting these organizations as component units.
The Redevelopment Agency of the City of Redwood City ( Agency) was created under the provisions of
the Community Redevelopment Law ( California Health and Safety Code) to redevelop certain areas in the
City. A Redevelopment Plan was originally adopted in July 1982 ( Original Area). It was amended in
May 1985 ( First Amendment) and again in December 1989 ( Second Amendment) to provide an improved
physical, social, and economic environment in the Agency’s project area. The Agency is authorized to
finance the Plan from various sources, including assistance from the City, the state and federal
governments, property tax increments, interest income, and the issuance of Agency bonds.
Redwood City Facilities and Infrastructure Authority ( RCFISA) was established in 1986 to finance the
construction of certain public facilities such as the Main Fire Station, City Hall, and Main Library. After
acquiring certain properties from the City, RCFISA leased them back to the City. The lease money
provided the funds for the debt service for the certificates of participation issued by the RCFISA to
acquire the properties from the City.
The Public Financing Authority ( PFA) was established in 1991 to finance construction of the new Police
Facility, to finance the defeasance of outstanding certificates of participation issued by the RCFISA, and
to issue tax increment bonds on behalf of the Redevelopment Agency. The PFA has since issued various
types of debt on behalf of the City and the Agency.
Component unit financial statements for each of the above entities may be obtained from the City of
Redwood City, Finance Department, 1017 Middlefield Road, Redwood City, CA 94063.
The Port of Redwood City was established under the City Charter as a department of the City and is
managed by the Port Commission of Redwood City, whose members are appointed by the City Council.
This commission is a semi- autonomous body and has full authority to manage the Port. Its financial
system is maintained separately from the City by the Port’s own financial staff. The Port’s Treasurer and
Legal Counsel are the City’s Finance Director and the City Attorney, respectively. The financial
transactions of the Port are incorporated as an enterprise fund.
30
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED)
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 Governmental 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. Certain eliminations
have been made as prescribed by GASB Statement No. 34 in regards to interfund activities, payables, and
receivables. All internal balances in the Statement of Net Assets have been eliminated except those
representing balances between the governmental activities, which are presented as internal balances and
eliminated in the total primary government column. These statements distinguish between the
governmental and business- type activities of the City. Governmental activities generally are financed
through taxes, intergovernmental revenues, and other non- exchange transactions. Business- type activities
are financed in whole or in part by fees charged to external parties.
The Statement of Activities presents a comparison between direct expenses and program revenues for
each segment of the business- type activities of the City 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 fiduciary funds and blended component units. Separate statements for each fund category—
governmental, proprietary, and fiduciary— are presented. The emphasis of fund financial statements is on
major individual funds, each of which is displayed in a separate column. All remaining governmental and
enterprise funds are aggregated and reported as non- major 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. Non- operating revenues, such as subsidies and investment
earnings, result from non- exchange transactions or ancillary activities. Operating expenses for
proprietary funds are those expenses that are essential to the primary operations of the funds. All other
expenses are reported as non- operating expenses.
C. Major Funds
GASB Statement No. 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 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.
31
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED)
The City reported the following major governmental funds in the accompanying financial statements:
General fund is to account for all financial resources except those to be accounted for in another fund. It
is the general operating fund of the City
Capital outlay fund is to account for all miscellaneous capital improvement projects that are financed by
the general fund.
Redevelopment Agency fund accounts for funds to be provided by loans and/ or property tax increment
from specific redevelopment areas for redevelopment projects within those areas.
The City reported all its enterprise funds as major funds in the accompanying financial statements:
Water utility fund is to account for the provision of water services to the residents of Redwood City.
Sewer utility fund is to account for the provision of sewer services to the residents of Redwood City.
Parking fund is to account for on- street and off- street parking operations within the boundaries of the
central business district of the City.
Port of Redwood City ( Port fund) is to account for Port activities within the Port Department including,
but not limited to, administration, maintenance and operations, and Port improvements.
The City also reports the following fund types:
Internal Service Funds - Internal service funds are used to account for costs of the City’s equipment
services, the City’s insurance program, the costs of the City’s telephone/ communications and information
technology services, maintenance and repair of buildings, custodial services, and delivery service, and
employee benefits. These services are provided to departments and other governments on a cost-reimbursement
basis.
Fiduciary Funds - These funds are used to account for assets held by the City in a trustee capacity or as an
agent for individuals, private organizations, other governmental units, and/ or other funds. The City
maintains four funds - Employee Benefit Plans Fund, Seaport Consolidated Bonds Fund, Pacific Shores
Community Facilities District Fund, and the Shores Transportation Improvement District Fund - as an
agent of the bondholders or City employees.
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 60 days after year- end.
The City’s fiduciary funds are agency funds which use the accrual basis of accounting. However, since
they are custodial in nature, they do not have a measurement focus.
32
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED)
During fiscal year 2004/ 05, the State of California changed the distribution method of the City’s sales tax
allocation under a program called the “ Triple Flip.” Under the “ Triple Flip,” 25% of the City’s share
of sales tax is now distributed from property tax receipts, with remittance of the sales tax to the
City coinciding with the semiannual collection of property tax receipts from property owners in
December and April. To recognize the sales tax revenue earned as of June 30, the City has changed its
availability period for sales tax revenue from 60 days after year- end to seven months after year- end. The
change in the availability period for sales tax will enable the City to accurately reflect sales tax earned in
the reporting period.
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.
General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general
long- term debt and acquisitions under capital leases are reported as other financing sources.
Non- exchange transactions, in which the City gives or receives value without directly receiving or giving
equal value in exchange, include property taxes, grants, entitlements, and donations. On an accrual basis,
revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from
grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements
have been satisfied.
Other revenues susceptible to accrual include other taxes, intergovernmental revenues, interest, and
charges for services.
Grant revenues are recognized in the fiscal year in which all eligibility requirements are met. Under the
terms of grant agreements, the City may fund certain 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 Governmental Accounting Standards Board pronouncements.
E. Compensated Absences
In compliance with Governmental Accounting Standards Board Statement No. 16, the City has
established a liability for accrued sick leave and vacation in relevant funds. For governmental activities,
the current liability for the payouts made after June 30, 2006 for those employees retired on or before
June 30, 2006 appears in the respective funds and the long- term liability appears in the government- wide
financial statements. This liability is set up for the current employees at the current rates of pay. An
employee may accumulate vacation up to two years entitlement and sick leave up to 960 or 1,200 hours
depending on the bargaining unit ( Fire Department employees who work 24 hour shifts may accumulate
up to 2,400 hours of sick leave).
An employee may elect to receive compensation in lieu of sick leave credits for any calendar year with
payment equal to varying amounts from 25% to 50% of the year’s unused sick leave, depending upon the
employee’s sick leave usage during the year. In addition to sick leave, payouts are made for unused
administrative holidays and accrued compensatory time.
33
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED)
If sick leave and vacation are not used by the employee or paid out during the term of employment,
compensation is payable to the employee at the time of retirement. Such compensation is calculated at
the employee’s prevailing rate at the time of retirement or termination. Whereas vacation is compensated
at 100% of accumulated hours, sick leave is compensated at 50% of accumulated hours at retirement
depending upon varying restrictions of the bargaining units. Upon termination only accrued vacations are
compensated. Each year an adjustment to the liability is made based on pay rate changes and
adjustments for the current portion. The general fund is primarily responsible for the repayment of the
governmental portion of the compensated absences.
Individual proprietary funds are responsible for the repayment of the liability attributable to their
respective funds.
F. Cash and Cash Equivalents
The City pools cash resources from all funds in order to facilitate the management of cash. The balance
in the pooled cash account is available to meet current operating requirements. Cash in excess of current
requirements is invested in various interest- bearing accounts and other investments for varying terms.
In accordance with GASB Statement No. 40, Deposit and Investment Disclosures ( Amendment of GASB
No. 3), certain disclosure requirements for Deposits and Investment Risks were made in the following
areas:
• Interest Rate Risk
• Credit Risk
o Overall
o Custodial Credit Risk
o Concentrations of Credit Risk
In addition, other disclosures are specified including use of certain methods to present deposits and
investments, highly sensitive investments, credit quality at year- end, and other disclosures.
In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain
Investments and for External Investment Pools, highly liquid market investments with maturities of one
year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value.
Market value is used as fair value for those securities for which market quotations are readily available.
The City participates in an investment pool managed by the State of California titled Local Agency
Investment Fund ( LAIF) which has invested a portion of the pooled funds in Structured Notes and Asset-
Backed Securities. LAIF’s investments are subject to credit risk with the full faith and credit of the State
of California collateralizing these investments. In addition, these Structured Notes and Asset- Backed
Securities are subject to market risk as to the change in interest rates.
Cash equivalents are considered amounts in demand deposits and short- term investments with a maturity
date within three months of the date acquired by the City and are presented as “ Cash and Investments” in
the accompanying Basic Financial Statements.
34
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED)
G. Inventories
Inventories are stated at moving average cost. The cost is recorded as an expenditure at the time an
individual inventory item is consumed. As inventories must be maintained at a certain level, a reserve for
inventories is set aside in the general fund balances. Consequently, these reserved funds are not available
for appropriation.
General fund inventories consist of stationery.
Equipment services fund inventory consists of tires, batteries, testing equipment, automotive parts, and
small tools.
H. Property Taxes
Property taxes attach as an enforceable lien on property as of January 1, and are collected for a 12 month
period effective July 1 by the San Mateo County tax collector. Taxes are billed once a year in late
October and are payable in two equal installments due by December 10 and April 10 of the following
year. The taxes not paid by those dates are subject to a penalty of 10%.
In September of 1993, the County of San Mateo Board of Supervisors adopted the “ Teeter Plan” for
secured property taxes. Under the Teeter Plan, the state law allows the county to advance to the cities all
property taxes billed, regardless of whether the taxes have been paid. The county then is entitled to keep
all penalties and interest accruing on delinquent taxes. Property taxes on unsecured taxable property are
not affected by this change.
Under Proposition 13, adopted by the voters in a statewide ballot in 1978, assessed value is increased by
the cost of living index, not to exceed 2% as of January 1 each year except for those properties that have
changed ownership during the 12 month period since the lien date. City property tax revenues are
recognized when levied to the extent that they result in current receivables.
I. Unbilled Service Receivables
In the water and sewer utilities, residential customers are billed bi- monthly and all commercial and
industrial customers monthly. Revenue is recorded as billed to customers on a cyclical basis. No accrual
is made for unbilled services. There were no unbilled services in Port, parking, or internal service funds
as of June 30, 2006. There is no accrual for unbilled water services as of June 30, 2006; revenues cannot
be recognized since water meters are not read at such date. Management believes that the revenue from
unbilled services does not have a material effect on total revenue.
J. 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 value on the date contributed. The
City’s policy is to capitalize all assets with costs exceeding certain minimum thresholds, $ 5,000 for
machinery and equipment, $ 100,000 for buildings, improvements, and infrastructure, and with useful
lives exceeding two years.
With the implementation of GASB Statement No. 34, the City has recorded all its public domain
( infrastructure) capital assets placed in service after June 30, 1980, which include roads, bridges, curbs
and gutters, streets and sidewalks, drainage systems, and lighting systems using the basic approach.
35
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED)
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. GASB Statement No. 34 requires that all capital assets with limited
useful lives be depreciated over their estimated useful lives. 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 as follows to capital assets.
Buildings 20- 50 Years
Improvements 33- 60 Years
Equipment 2- 15 Years
Streets 20 Years
Parks 25 Years
Bridges 30 Years
Traffic Signals 20 Years
Storm Drains 40 Years
K. Implementation of New GASB Pronouncements
The City adopted new accounting standards in order to conform to the following Governmental
Accounting Standards Board Statements:
Statement No. 44 - Statistical Section
GASB Statement No. 44 improves the understandability and usefulness of the information that local
governments present as supplementary information in the statistical section. This information includes
financial trends, revenue capacity, debt capacity, demographic and economic information, and operation
information.
NOTE 2 – CASH AND INVESTMENTS
A. Cash and Deposits
The carrying amount of the City’s cash and deposits was ($ 836,493) and $ 813,743 at June 30, 2006 and
2005, respectively. Bank balances before reconciling items were $ 3,050,430 at June 30, 2006. Of the
total bank balances, $ 323,750 was insured or held by the City or its agent in the City's name and
$ 2,726,678 was collateralized.
All cash deposits in banks are fully insured or collateralized. California state law requires that public
fund deposits be collateralized by either government securities with a value equal to 110% of the deposits
or first trust deed mortgage notes having a value equal to 150%. Per state law each institution must use a
third party ( which may be the institution’s trust department) to hold the pledged collateral in a pool to
secure all the institution’s public fund deposits. The code states that collateral pledged in this manner
shall have the effect of perfecting a security interest in such collateral superior to those of a general
creditor. Thus, collateral for cash is considered to be held in the City’s name. Banks and savings and
loans in California are subject to state- mandated reporting requirements to ensure that the required levels
of control are maintained. The City may waive collateral requirements for deposits, which are fully
insured with each financial institution up to $ 100,000 by the Federal Deposit Insurance Corporation
( FDIC).
36
NOTE 2 – CASH AND INVESTMENTS ( CONTINUED)
Cash balances from all funds are combined and invested to the extent possible pursuant to the City
Council approved investment policy and guidelines and state government code. The earnings from these
investments are allocated monthly to each fund based on an average of monthly opening and closing
balances of cash and investments. Investments are stated at fair value. All enterprise fund investments
are considered to be liquid investments for cash flow purposes.
The following is a summary of pooled cash and investments, including cash and investments with fiscal
agent at June 30, 2006.
Fiduciary Fund
Financial
Government- wide Statement of Net Assets Statements
Fiduciary Funds
Governmental Business- Type Statement of
Activities Activities Total Net Assets Total
$ $ $ $ $
Cash and Investment 93,540,042 30,308,529 123,848,571 123,848,571
Restricted Cash and
Investments 31,280,130 42,818,360 74,098,490 8,168,679 82,267,169
Total Cash and Investments 206,115,740
B. Risk Disclosures
Interest Rate Risk. As a means of limiting its exposure to fair value losses arising from rising interest
rates, the City’s investment policy provides that final maturities of securities cannot exceed three years.
Specific maturities of investments depend on liquidity needs.
As of June 30, 2006, the City had the following cash and investments and maturities:
Investment Maturities ( in years)
Fair Value 1 Year or Less 1- 2 Years 2- 3 Years
$ $ $ $
Demand Accounts at Banks ( 836,493) ( 836,493)
Certificates of Deposit 2,500,000 2,500,000
Petty Cash 12,211 12,211
Securities of U. S. Government Treasury Agencies:
Federal Home Loan Bank 22,770,940 13,903,120 5,882,820 2,985,000
Federal National Mortgage Association 56,092,920 29,759,910 17,561,760 8,771,250
US Treasury Notes 2,952,540 2,952,540
Corporate Notes 1,000,100 1,000,100
County of San Mateo Investment Pool 19,340,680 19,340,680
California Local Agency Investment Fund 20,015,673 20,015,673
TOTAL 123,848,571 85,695,201 23,444,580 14,708,790
Credit Risk – Defined as the loss due to failure of the issuer of a security, shall be mitigated by investing
in investment grade securities and by diversifying the investment portfolio so that failure of any one issue
does not unduly harm the City’s capital base and cash flow.
37
NOTE 2 – CASH AND INVESTMENTS ( CONTINUED)
Under the provisions of the City’s investment policy, and in accordance with California Government Code,
the following investments are authorized:
The City’s investments are rated by the nationally recognized statistical rating organizations as follows:
Moody’s S& P Fitch Composite
US Agencies, Securities and Corporate Notes:
Citigroup - Corporate Notes Aa1 AA- AA+
U. S. Treasury Notes AAA AAA AAA AAA
Federal Home Loan Bank Aaa AAA AAA
Federal National Mortgage Association Aaa AAA AAA
External Pools:
State of California - Local Agency Investment
Pool
Not Rated Not Rated Not Rated Not Rated
County of San Mateo Investment Pool Not Rated Not Rated Not Rated Not Rated
Custodial Credit Risk. For an investment, custodial credit risk is the risk that, in the event of the failure
of the counter party, the City will not be able to recover the value of its investments or collateral
securities that are in the possession of an outside party. All securities, with the exception of the County
Pool and LAIF, are held by third- party custodians ( Union Bank of California Trust Division, U. S. Bank
and Bank of New York). Union Bank, U. S. Bank and Bank of New York are registered members of the
Federal Reserve Bank. The securities held by Union Bank, U. S. Bank and Bank of New York are in
street name, and an account number assigned to the City identifies ownership. None of the City’s
investments were subject to custodial credit risk.
In fiscal year 1997/ 98, the City adopted Governmental Accounting Standards Board Statement No. 31,
which requires that the City's investments be carried at fair value instead of cost. Under GASB 31, the
City must adjust the carrying value of its investments to reflect their fair value at each fiscal year- end, and
it must include the effects of these adjustments in income for that fiscal year. Changes in value at the
fiscal year ended June 30, 2006 from the fiscal year ended June 30, 2005 amounted to an unrealized
decr