Fox Theater - 1950’ s
Fox Theater - Today
Main & Broadway - San Francisco Earthquake 1906
Main & Broadway - Today
Fire Station on Middlefield Road – 1920- 1987
Main Library on Middlefield Road - Today
City of Redwood City
Redwood City, California
fiscal year ended
June 30, 2005 Comprehensive Annual Financial Report
City of Redwood City
Redwood City, California
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
Fiscal Year Ended June 30, 2005
Prepared by
City of Redwood City Finance Department
City of Redwood City
Redwood City, California
Comprehensive Annual Financial Report
Fiscal Year Ended June 30, 2005
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, 2005
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..................................................... 60
Redevelopment Agency Fund - Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual..................................................... 61
E. Supplemental Information:
General Fund:
Comparative Balance Sheet .................................................................................................... 64
Comparative Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget ( GAAP Basis) and Actual...................................... 65
Schedule of Revenues Compared with Budget ( GAAP Basis) and Actual ............................ 66
Schedule of Expenditures Compared with Budget ( GAAP Basis) and Actual ...................... 67
Non- Major Governmental Funds:
Combining Balance Sheets ..................................................................................................... 70
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances .............. 74
Budgeted Non- Major Funds:
Combining Schedule of Revenues, Expenditures, and Changes in
Fund Balances - Budget and Actual ................................................................................. 78
Internal Service Funds:
Combining Statement of Net Assets ....................................................................................... 88
Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets ................. 89
Combining Statement of Cash Flows Increase ( Decrease)
in Cash and Cash Equivalents........................................................................................... 90
Agency Funds:
Combining Statement of Changes in Assets and Liabilities............................................. 92
City of Redwood City
Redwood City, California
Comprehensive Annual Financial Report
Fiscal Year Ended June 30, 2005
TABLE OF CONTENTS
_______________________________________________________________________________
III. STATISTICAL SECTION Table Page
General Governmental Expenditures by Function or Program -
Last Ten Fiscal Years .................................................................................................. 1 93
General Governmental Revenues by Sources - Last Ten Fiscal Years ....................... 2 94
Property Tax Levies and Collections - Last Ten Fiscal Years .................................... 3 95
State and Locally Assessed Values of Taxable Property - Last Ten Fiscal Years ...... 4 96
Property Tax Rates Direct and Overlapping Governments -
Last Ten Fiscal Years .................................................................................................. 5 97
Special Assessment Collections - Last Ten Fiscal Years ............................................ 6 98
Computation of Legal Debt Margin............................................................................. 7 99
Computation of Direct and Overlapping Debt............................................................. 8 100
Revenue Bond Coverage - Last Ten Fiscal Years ....................................................... 9 101
Construction Values - Last Ten Fiscal Years .............................................................. 10 102
Top Ten Principal Property Taxpayers........................................................................ 11 103
Demographic Statistics - Last Ten Fiscal Years.......................................................... 12 104
Miscellaneous Statistics............................................................................................... 13 105
i
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 19, 2005
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, 2005.
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
ii
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.
iii
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 2005 was a respectable 4.5%, 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
350,100 as of June 2005). 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 148,663 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 February 2006. If approved, construction should begin in late spring 2006 with
completion within four months of the commencement of construction.
The downtown cinema/ retail project is expected to open in the spring of 2006. The cinema will include 20 screens
while the retail component of the project will have 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, Pizza
Lisa, Marble Slab, Chipotle, Fatburger, and Tacone.
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 $ 3.2 million. At the end of fiscal year 2004/ 05, the total investments, including cash with fiscal agents,
cash at banks, and petty cash, stood at $ 212,572,553.
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 $ 15,000,000. The layer from $ 1,000,001 to $ 4,000,000 is self- insured by CARMA,
the layer from $ 4,000,001 to $ 10,000,000 is insured by a commercial insurer, and the layer from $ 10,000,001 to
$ 15,000,000 is self- insured by CARMA.
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.
iv
The appropriation limit for Redwood City for the fiscal year 2004/ 05 is at $ 246,942,560 while the actual
appropriations subject to the limit amounted to $ 51,518,825. 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
FY 2002- 03 FY 2003- 04 FY 2004- 05
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, 2004. This is the 18th 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, 2004. This was the 19th 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.
v
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
vi
City of Redwood City
Comprehensive Annual Financial Report
June 30, 2005
ix
CITY OF REDWOOD CITY - REDWOOD CITY, CALIFORNIA
PRINCIPAL OFFICIALS
June 30, 2005
CITY COUNCIL
Jeff Ira, Mayor ......................................................................................... November 2005
Barbara Pierce, Vice Mayor..................................................................... November 2007
Alicia Aguirre .......................................................................................... November 2007
Ian Bain.................................................................................................... November 2007
Rosanne Foust.......................................................................................... November 2007
Jim Hartnett.............................................................................................. November 2005
Diane Howard .......................................................................................... November 2005
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 .................................................................................... Maria Rivera- Peña
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
x
CITY OF REDWOOD CITY - REDWOOD CITY, CALIFORNIA
FINANCE DEPARTMENT STAFF
June 30, 2005
Brian Ponty ................................................... Director of Finance and Financial Planning
Alison Freeman.............................................. Financial Services Manager
Irvin Weinstock.............................................. Senior Accountant
Kyi Khin......................................................... Senior Accountant
Open............................................................... Senior Accountant
Rajesh Sewak................................................. Accountant
Sandy Jennings .............................................. Administrative Assistant
City of Redwood City
June 30, 2005
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
Youth 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
City of Redwood City
Finance Department
June 30, 2005
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
Accountant
Financial Services
Manager
Senior
Accountant
Revenue Svcs./
Sr. 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
3
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, 2005. We encourage readers to consider the
information presented here in conjunction with the accompanying transmittal letter and basic financial statements.
FISCAL YEAR 2004/ 05 FINANCIAL HIGHLIGHTS
The City continues to experience moderate revenue growth as the local economy gradually recovers from the “ dot-com”
economic implosion that occurred in the early part of this decade. Financial highlights of the year include the
following:
• The City’s total net assets increased $ 17.14 million in FY 2004/ 05, after a $ 7.96 million increase in the
preceding year. At June 30, 2005, net assets totaled $ 375.3 million.
• Total City revenues, including program and general revenues, were $ 143.7 million, an increase of $ 18.4
million from the prior year, while total expenses were $ 126.5 million, an increase of $ 9.1 million from FY
2003/ 04.
• Net assets in governmental funds increased $ 17.5 million, while net assets in business activities decreased
$. 3 million.
• Governmental program revenues were $ 39.5 million, an increase of $ 10.4 million from FY 2003/ 04’ s $ 29.1
million.
• Governmental program expenses increased to $ 92.2 million in FY 2004/ 05, up $ 7.0 million from the prior
year.
• Revenues from business- type activities increased to $ 34.1 million in FY 2004/ 05, up $ 1.6 million from the
prior year.
• Expenses of business- type activities increased to $ 34.4 million in FY 2004/ 05, a $ 2.4 million increase from
the prior year.
• General fund revenues of $ 70 million increased by $ 5 million from the prior year.
• General fund balance of $ 38.6 million at the fiscal year end declined by $. 3 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 Statements 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- 58 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 $ 375 million at June 30, 2005.
City’s Net Assets ( in Millions)
Governmental Business- type
Activities Activities Total
2005 2004 2005 2004 2005 2004 Variance
$ $ $ $ $ $
Cash and investments 142.664 145.954 61.653 25.440 204.317 171.394 19.209%
Other assets 27.792 38.405 29.366 31.571 57.158 69.976 - 18.318%
Capital assets 196.187 167.242 85.483 82.577 281.670 249.819 12.750%
Total assets 366.643 351.601 176.502 139.588 543.145 491.189 10.578%
Long- term debt outstanding 86.510 89.846 48.528 12.917 135.038 102.763 31.407%
Other liabilities 23.510 22.596 9.298 7.675 32.808 30.271 8.381%
Total liabilities 110.020 112.442 57.826 20.592 167.846 133.034 26.168%
Net assets:
Invested in capital assets,
net of debt 141.069 113.369 38.599 67.464 179.668 180.833 - 0.644%
Restricted 85.745 99.315 27.423 1.565 113.168 100.880 12.181%
Unrestricted
Other unrestricted net assets 29.809 26.475 52.654 49.967 82.463 76.442 7.877%
Total net assets 256.623 239.159 118.676 118.996 375.299 358.155 4.787%
The largest portion ( 48%) 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 ( 30%) represents resources that are subject to external restrictions on
how they may be used. The remaining balance of unrestricted net assets ($ 82.463 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 $ 17.1 million during the current fiscal year.
MANAGEMENT’S DISCUSSION AND ANALYSIS
7
GOVERNMENTAL ACTIVITIES
Governmental activities increased the City’s net assets by $ 17.5 million, thereby accounting for 100% of the total
growth in the City’s net assets. Key elements of this increase are as follows:
Changes in City’s Net Assets ( in Millions)
Governmental Business- type
Activities Activities Total
2005 2004 2005 2004 2005 2004 Variance
Revenues $ $ $ $ $ $
Program revenues:
Community development 12.567 4.703 12.567 4.703 167.212%
Human Services 0.370 0.376 0.370 0.376 - 1.596%
Public safety 5.723 4.991 5.723 4.991 14.666%
Transportation 13.256 8.700 13.256 8.700 52.368%
Environmental support and protection 2.095 1.809 2.095 1.809 15.810%
Leisure, cultural and information services 4.576 6.823 4.576 6.823 - 32.933%
Policy development and implementation 0.944 1.667 0.944 1.667 - 43.371%
Water 16.311 16.353 16.311 16.353 - 0.257%
Sewer 10.274 9.655 10.274 9.655 6.411%
Parking 0.551 0.412 0.551 0.412 33.738%
Port of Redwood City 5.951 5.559 5.951 5.559 7.052%
General revenues:
Taxes/ special assessments 65.853 61.594 0.034 0.026 65.887 61.620 6.925%
Investment earnings 2.432 0.484 0.951 0.215 3.383 0.699 383.977%
Other 1.774 1.732 0.003 0.232 1.777 1.964 - 9.521%
Total revenues 109.590 92.879 34.075 32.452 143.665 125.331 14.628%
Expenses
Community development 13.922 13.888 13.922 13.888 0.245%
Human services 1.261 1.255 1.261 1.255 0.478%
Public safety 39.677 34.738 39.677 34.738 14.218%
Transportation 10.008 8.626 10.008 8.626 16.021%
Environmental support and protection 2.804 1.907 2.804 1.907 47.037%
Leisure, cultural and information services 18.186 18.107 18.186 18.107 0.436%
Policy development and implementation 2.600 3.381 2.600 3.381 - 23.100%
Interest on long term debt 3.703 3.344 3.703 3.344 10.736%
Water 16.692 16.773 16.692 16.773 - 0.483%
Sewer 12.742 10.786 12.742 10.786 18.135%
Parking 0.458 0.449 0.458 0.449 2.004%
Port of Redwood City 4.468 4.114 4.468 4.114 8.605%
Total expenses 92.161 85.246 34.360 32.122 126.521 117.368 7.799%
Change in net assets before transfers 17.429 7.633 ( 0.285) 0.330 17.144 7.963 115.296%
T ransfers 0.035 0.040 ( 0.035) ( 0.040)
Change in net assets 17.464 7.673 ( 0.320) 0.290 17.144 7.963 115.296%
Net assets - July 1 239.159 231.486 118.996 118.706 358.155 350.192 2.274%
Net assets - June 30 256.623 239.159 118.676 118.996 375.299 358.155 4.787%
Key elements of the increase/ decrease in revenues for governmental activities are as follows:
General governmental revenues increased about 9.8%, or $ 6.249 million from FY 2003/ 04 due primarily to
increases in tax revenues and grants received.
Community development revenues increased due to the receipt of developer contributions related to the public
underground parking garage.
MANAGEMENT’S DISCUSSION AND ANALYSIS
8
Public safety revenues were higher in FY 2004/ 05 due to an increase in Fire Department grant revenue.
Transportation revenues increased due to contributions from property owners for street improvements and grants.
Environmental support and protection revenues increased primarily as a result of increased interest on facilities fees
in General Improvement District 1- 64. Leisure, cultural and information services declined primarily due to state
grant revenue received for the new Redwood Shores library project in the previous year. Policy development and
implementation revenues decreased due to the receipt of a donation in the amount of $ 1 million in the prior year.
Key elements of the increase/ decrease in expenses for governmental activities are as follows:
Total expenses were up 8.1%, or $ 6.915 million due mostly to increases in public safety, transportation, and
environmental support and protection. Public safety increases were driven for the most part by higher salary and
benefit costs while transportation expenses were higher because of increased expenses related to the street
pavement management program. Environmental support and protection expenses increased due to increased
expenses for storm drainage. These increases were offset by budget reductions in other programs of the City along
with a decrease in policy development and implementation expenses resulting from increased reimbursements from
other funds.
BUSINESS- TYPE ACTIVITIES
Business- type activities decreased the City’s net assets by $ 320,000 in FY 2004/ 05.
Key elements accounting for increases or decreases in revenues and expenses are as follows:
Business- type revenues were higher in FY 2004/ 05 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 issued in FY 2004/ 05.
The sewer utility’s expenses were significantly higher (+ 18.1%) in FY 2004/ 05 primarily due to an increase of $ 1
million in sewer maintenance programs in FY 2004/ 05.
The Port of Redwood City experienced an 8.6% increase in expenses due to increased 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, 2005, the City’s governmental funds reported combined fund balances of $ 138.1 million, which is a
decrease of $ 12.4 million from the beginning year balance of $ 150.5 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.
Governmental fund revenues increased $ 18.5 million this year to a new total of $ 108.4 million. The redevelopment
agency fund accounted for most of this increase, with the general fund, the capital outlay fund, the transportation
fund, and the Shores Transportation Improvement District fund accounting for the remainder. Expenditures,
including capital outlay, increased $ 18.6 million this year to a new total of $ 121.2 million. Most of the increase
was attributable to an increase in capital outlay expenditures as the City purchased land for the public underground
parking garage, and undertook other projects including Schaberg Library renovation and Fair Oaks school field
artificial turf.
MANAGEMENT’S DISCUSSION AND ANALYSIS
9
The general fund is the chief operating fund of the City. At June 30, 2005, unreserved fund balance of the general
fund was $ 34.4 million of which $ 18 million is available for subsequent years’ expenditures while total fund
balance declined to $ 38.6 million from $ 38.9 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 54% of total fund expenditures, while total fund balance represents 61% of that same amount.
The fund balance of the City’s general fund decreased by $. 3 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 $ 5 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
$ 1.1 million as assessed valuations rose 3.79%, 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 $ 2.5 million
from the County as its share of the Educational Revenue Augmentation Fund ( ERAF) rebate in FY 2004/ 05.
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 $ 2.6 million,
but this increase was offset by a $ 1.5 million takeaway by the state.
General fund expenditures increased $ 3.5 million due to increased public safety expenditures as a result of higher
salaries and benefits in the amount of $ 4.8 million offset by budget reductions in various City programs. Total
expenditures were less than budgeted and represented an increase of 5.8% in FY 2004/ 05, to a total of $ 63.5
million.
Transfers out of the general fund increased $ 1.1 million in FY 2004/ 05 resulting from increased transfers out for
debt service and capital projects.
Capital Outlay Fund - This fund accounts for resources provided to finance general governmental capital projects.
In FY 2004/ 05, the capital outlay fund generated $ 1.1 million in revenue, most of which was from
intergovernmental grants. This fund was also the recipient of $ 5.7 million of transfers from the general fund, $ 8.5
million of other interfund transfers, and $ 2.6 million of land contribution from the Redevelopment Agency. Total
outlays were $ 20.3 million of which $ 17 million met with City’s criteria for capitalization. The balance ($ 3.3
million) was expended in FY 2004/ 05. Total outlays in the prior year ( FY 2003/ 04) were $ 4 million. All of the
capital outlay fund’s $ 28 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 $ 9.2 million primarily due to the expenditure of
proceeds of bonds issued for the downtown revitalization efforts in FY 2003/ 04 and the contribution of land to the
capital outlay fund.
Proprietary Funds
Enterprise fund net assets totaled $ 118.7 million at the end of the fiscal year, a decrease of $. 3 million over the
prior year. Enterprise operating revenues were $ 34.1 million this year, an increase of $ 1.8 million from last year,
while net non- operating revenues were $(. 9) million compared to $(. 8) million the prior year.
Enterprise fund operating expenses were $ 33.4 million this year, up $ 2.2 million from the prior year, most of which
was due to higher operating expenses in the sewer and Port of Redwood City funds.
MANAGEMENT’S DISCUSSION AND ANALYSIS
10
Water Utility - Net assets of the water utility fund increased $. 3 million in the current year to a total of $ 46.7
million.
Sewer Utility - The sewer utility fund incurred an operating loss of $ 1.4 million in the current year, up from the
operating loss of $. 6 in the prior year. Revenues increased by $ 1.1 million while expenses increased $ 2 million
over the prior year. Non- operating revenues declined by $. 5 million this year as a result of a decrease in the value
of the City’s investment in the South Bayside System Authority.
Parking Fund - Operating revenues increased by $ 33,000 this year to $ 446,000, while operating expenses decreased
to $ 420,000, a decrease of $ 10,000. Net non- operating revenues ( expenses) increased from $ 9,817 in FY 2003/ 04
to $ 126,181 in FY 2004/ 05 primarily as a result of capital contributions in the current year.
Port Fund - Operating revenues were up 11.4% while operating expenses were up 18.3% from FY 2003/ 04. Non-operating
revenues ( expenses) were down 29% primarily due to the receipt in FY 2003/ 04 of one- time
contributions and legal settlements. Overall, net assets increased from $ 30.3 million to $ 32 million, or 6%.
GENERAL FUND BUDGETARY HIGHLIGHTS
Property taxes exceeded budget by $ 3 million primarily due to the receipt of a $ 2.5 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.
Sales and other taxes exceeded budget by $ 1.8 million mostly due to better than anticipated sales tax revenue ($. 8
million), higher utility users’ taxes ($ 0.5 million), transient occupancy taxes ($ 0.2 million), and property transfer
tax ($. 3 million).
Charges for services were $. 8 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 2004/ 05, the City had $ 281.7 million, net of depreciation, invested in a broad
range capital assets used in governmental activities, as shown in the table below. Additional information on the
City’s capital assets can be found in Note 4 ( pages 41- 42) and Note 16 ( page 58) of this report.
Capital Assets at Year- end ( in Millions)
Governmental Business- Type
Activities Activities Total
2005 2004 2005 2004 2005 2004 Variance
$ $ $ $ $ $
Land 27.775 11.581 3.448 3.448 31.223 15.029 107.752%
Streets 64.592 60.304 64.592 60.304 7.111%
Construction in progress 60.090 48.463 26.217 23.851 86.307 72.314 19.350%
Buildings 56.024 56.024 9.498 9.498 65.522 65.522 0.000%
Equipment 15.848 15.289 2.303 2.002 18.151 17.291 4.974%
Improvements 79.125 76.767 79.125 76.767 3.072%
Harbor improvements 3.299 3.292 3.299 3.292 0.213%
Parks, bridges, etc. 20.989 19.488 20.989 19.488 7.702%
Traffic signals 1.968 1.968 1.968 1.968 0.000%
Storm drains 7.123 7.015 7.123 7.015 1.540%
Less accumulated depreciation ( 58.222) ( 52.891) ( 38.407) ( 36.281) ( 96.629) ( 89.172) 8.362%
Total capital assets 196.187 167.241 85.483 82.577 281.670 249.818 12.750%
Governmental Activities
The substantial ( 140%) increase in Land and the greater part of the 24% increase in Construction in Progress is
driven by Redevelopment Agency construction projects in connection with downtown revitalization efforts. Streets
increased due to the Roosevelt reconstruction project. The increase in Parks resulted from installation of artificial
turf in play fields.
Business- Type Activities
The $ 2.4 million increase in Construction in Progress resulted primarily from the recycled water project. The
improvements increased by $ 2.4 million due to the rehabilitation of the Lakeview water tank and two pump
stations.
Long- Term Debt - Issues described in detail in Notes 6 and 7 to Financial Statements. During FY 2004/ 05 the
City’s Public Financing Authority issued $ 35.79 million of water revenue bonds.
Outstanding Debt ( in Millions)
Governmental Business- Type
Activities Activities Total
2005 2004 2005 2004 2005 2004 Variance
$ $ $ $ $ $
Revenue bonds 28.834 30.774 45.815 10.225 74.649 40.999 82.075%
General improvement bonds 4.005 5.625 4.005 5.625 - 28.800%
Tax increment bonds 45.694 45.628 45.694 45.628 0.145%
Loans 0.339 0.381 1.975 1.997 2.314 2.378 - 2.691%
Accrued sick leave and vacation 7.638 7.438 0.738 0.695 8.376 8.133 2.988%
Total long term debt 86.510 89.846 48.528 12.917 135.038 102.763 31.407%
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, 2005, a total of $ 35.7 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 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, 2005 there were an
estimated 350,100 jobs. This latter amount is slightly below the estimated number of jobs ( 352,500) as of June 30,
2004, which gives us hope that we are nearing the end of the job shedding phase and that we will begin to see jobs
added in the near future. 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, several key revenues, such as sales tax and
transient occupancy taxes remain below the levels they were at in FY 2000/ 01. In year- to- year comparisons from
FY 2003/ 04 to FY 2004/ 05, sales tax revenues have increased 5.10% from $ 15.7 million to $ 16.5 million, transient
occupancy taxes have increased 21.2% from $ 1.84 million to $ 2.23 million ( resulting, in part, from a voter-approved
transient occupancy tax rate increase from 8% to 10% in December 2003) while development- related
revenues have declined 8.3% from $ 1.92 million in FY 2003/ 04 to $ 1.76 million in FY 2004/ 05.
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 28% as of September 30, 2005. By comparison, in 1999 the vacancy rate for
commercial office space was 1.2%. Redwood City currently had over 2.7 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 regains its strength.
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 and have enabled the City to
withstand the downturn in the technology sector. In addition to the technology sector, we have manufacturing
( Tyco Electronics), biotechnology ( Maxygen, Abbot Vascular Devices, and Genelabs), auto dealers ( both domestic
and import), 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.
MANAGEMENT’S DISCUSSION AND ANALYSIS
13
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.
The Oracle Corporation, a leading database developer, maintains its world headquarters in Redwood City. Oracle
presently has over 6,500 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, 2005
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— 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
program. 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, 2005
Governmental Business- Type
Activities Activities Total
$ $ $
ASSETS
Cash and investments available for operations 102,849,064 31,269,073 134,118,137
Cash and investments, restricted 39,814,657 30,384,249 70,198,906
Receivables ( net of allowance for uncollectibles):
Taxes and assessments - current 5,275,190 5,275,190
Accounts 1,392,573 2,357,471 3,750,044
Loans 11,592,480 11,592,480
Accrued interest 1,297,064 160,998 1,458,062
Due from other governmental agencies 2,083,541 505,915 2,589,456
Inventory of supplies at cost 242,848 242,848
Deposits 673,103 673,103
Prepaid expenses 11,375 193,038 204,413
Investment in land held for redevelopment 3,604,124 3,604,124
Capital assets:
Nondepreciable 87,864,514 29,664,551 117,529,065
Depreciable buildings, property, equipment and infrastructure, net 108,322,183 55,817,852 164,140,035
Unamortized bond discounts & issuance costs 1,620,780 1,294,906 2,915,686
Investment in sewer authority 18,029,631 18,029,631
Investment in sewage capacity rights 2,446,643 2,446,643
Advances to South Bayside System Authority 4,378,118 4,378,118
Total assets 366,643,496 176,502,445 543,145,941
LIABILITIES
Accounts payable 6,466,708 4,107,093 10,573,801
Accrued interest payable 831,531 548,115 1,379,646
Accrued payroll 2,930,721 2,930,721
Deposits payable 3,466,226 258,254 3,724,480
Insurance claims payable 8,953,720 8,953,720
Deferred revenue 861,336 167,082 1,028,418
Environmental liability 4,217,700 4,217,700
Accrued sick leave and vacation:
Due in one year 1,735,213 367,587 2,102,800
Due in more than one year 5,903,221 370,231 6,273,452
Long- Term Debt:
Due in one year 4,918,378 1,063,232 5,981,610
Due in more than one year 73,953,348 46,726,910 120,680,258
Total liabilities 110,020,402 57,826,204 167,846,606
NET ASSETS
Invested in capital assets, net of related debt 141,068,539 38,599,000 179,667,539
Restricted for:
Capital projects 42,436,923 24,040,984 66,477,907
Debt service 6,410,516 3,381,677 9,792,193
Community development projects 33,565,141 33,565,141
Other purposes 3,332,254 3,332,254
Total restricted net assets 85,744,834 27,422,661 113,167,495
Unrestricted net assets 29,809,721 52,654,580 82,464,301
Total net assets 256,623,094 118,676,241 375,299,335
See accompanying notes to financial statements
16
CITY OF REDWOOD CITY, CALIFORNIA
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2005
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 13,733,203 188,834 2,658,444 1,201,830 8,706,717 ( 1,355,046) ($ 1,355,046)
Human services 1,260,521 369,561 ( 890,960) ( 890,960)
Public safety 39,677,167 1,884,219 1,361,681 2,477,394 ( 33,953,873) ( 33,953,873)
Transportation 10,007,929 87,945 1,512,690 11,655,118 3,247,824 3,247,824
Environmental support and protection 2,788,314 16,013 1,251,622 843,629 ( 709,076) ( 709,076)
Leisure, cultural and information services 18,160,057 26,366 2,709,142 1,185,275 682,018 ( 13,609,988) ( 13,609,988)
Policy development and implementation 3,934,870 ( 1,335,162) 729,524 109,679 104,124 ( 1,656,381) ( 1,656,381)
Interest on long term debt 3,702,727 ( 3,702,727) ( 3,702,727)
Total Governmental Activities 93,264,788 ( 1,103,949) 9,320,896 5,740,716 24,469,000 ( 52,630,227) ( 52,630,227)
Business- Type Activities:
Water Utility Fund 16,067,277 625,413 16,311,364 ( 381,326) ( 381,326)
Sewer Utility Fund 12,305,310 437,117 10,007,658 267,294 ( 2,467,475) ( 2,467,475)
Parking Fund 416,063 41,419 445,723 104,888 93,129 93,129
Port of Redwood City 4,468,366 5,950,512 1,482,146 1,482,146
Total Business- Type Activities 33,257,016 1,103,949 32,715,257 372,182 ( 1,273,526) ( 1,273,526)
Total 126,521,804 42,036,153 5,740,716 24,841,182 ( 52,630,227) ( 1,273,526) ( 53,903,753)
General revenues:
Taxes:
Property taxes 29,831,476 34,081 29,865,557
Sales taxes 16,476,894 16,476,894
Other taxes 19,545,345 19,545,345
Investment Earnings 2,432,000 951,375 3,383,375
Other 1,774,027 3,272 1,777,299
Transfers 34,964 ( 34,964)
Total general revenues and transfers 70,094,706 953,764 71,048,470
Change in Net Assets 17,464,479 ( 319,762) 17,144,717
Net Assets- Beginning 239,158,615 118,996,003 358,154,618
Net assets- Ending 256,623,094 118,676,241 375,299,335
See accompanying notes to financial statements
17
18
City of Redwood City
Comprehensive Annual Financial Report
June 30, 2005
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 2005.
Individual non- major funds may be found in the supplemental section.
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, 2005
Capital Redevelopment Other Total
General Outlay Agency Governmental Governmental
Fund Fund Fund Funds Funds
$ $ $ $ $
ASSETS
Cash and investments available for operation 38,206,461 9,867,292 10,946,231 29,086,954 88,106,938
Cash and investments, restricted 14,746,390 9,946,395 15,121,872 39,814,657
Receivables ( net of allowance for uncollectibles)
Taxes and assessments - curren 5,062,530 212,660 5,275,190
Accounts 1,135,426 605 229,172 1,365,203
Loans 3,126,426 1,300,000 1,257,778 5,908,276 11,592,480
Accrued interest 809,867 25,666 98,929 104,364 1,038,826
Due from other governmental agencie 894,128 146,157 959,325 1,999,610
Inventory of supplies at cos 115 115
Advances to other funds 90,700 3,051,157 3,141,857
Deposits 377,500 377,500
Prepaid expenditures 11,375 11,375
Investment in land held for redevelopmen 293,106 3,311,018 3,604,124
Total Assets 49,337,028 29,137,267 22,542,439 55,311,141 156,327,875
LIABILITIES
Accounts payable 2,133,372 647,847 1,373,543 1,693,952 5,848,714
Accrued payroll 2,930,721 2,930,721
Deposits payable 3,344,473 57,500 2,979 61,274 3,466,226
Deferred revenue 877,922 51,157 929,079
Deferred loan revenue 11,643 461,310 472,953
Advances from other funds 3,051,157 90,700 3,141,857
Accrued sick leave and vacation 1,453,747 1,453,747
Total Liabilities 10,740,235 756,504 4,439,322 2,307,236 18,243,297
FUND BALANCES
Reserved for:
Encumbrances 736,447 1,152,046 11,552,671 4,702,105 18,143,269
Loans 3,126,426 1,300,000 1,246,135 5,446,966 11,119,527
Land held for redevelopmen 293,106 3,311,018 3,604,124
Low income housing 2,659,252 2,659,252
Inventory 115 115
Prepaid expenditures 11,375 11,375
Advances to other funds 90,700 90,700
Debt service 7,256,590 7,256,590
General reserve 250,000 250,000
Unreserved, reported in
General fund 34,381,730 34,381,730
Special revenue funds 5,011,205 16,734,298 21,745,503
Debt service funds ( 29,697) ( 29,697)
Capital projects funds 25,928,717 12,923,373 38,852,090
TOTAL FUND BALANCES 38,596,793 28,380,763 18,103,117 53,003,905 138,084,578
Total Liabilities and Fund Balances 49,337,028 29,137,267 22,542,439 55,311,141 156,327,875
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, 2005
$
TOTAL FUND BALANCES -- TOTAL GOVERNMENTAL FUNDS 138,084,578
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 190,607,116
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 10,652,329
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 258,238
Deferred revenue 540,696
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 1,620,780
Long- term debt ( 78,871,726)
Interest payable ( 831,531)
Non- current portion of accrued sick leave and vacation ( 5,437,386)
NET ASSETS OF GOVERNMENTAL ACTIVITIES 256,623,094
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, 2005
Capital Redevelopment Other Total
General Outlay Agency Governmental Governmental
Fund Fund Fund Funds Funds
$ $ $ $ $
REVENUES
Property taxes/ special assessments 21,570,524 6,404,456 5,032,828 33,007,808
Sales and other taxes 29,920,574 29,920,574
Licenses and permits 1,086,454 1,086,454
Fines, forfeitures and penalties 670,968 341,240 1,012,208
Use of money and property 1,359,651 441,431 602,815 3,591,489 5,995,386
Net increase ( decrease) in fair value of investments ( 14,390) ( 6,013) ( 1,663) ( 76,894) ( 98,960)
Intergovernmental 8,461,735 682,018 7,886,009 17,029,762
Contributions 8,457,130 4,807,966 13,265,096
Charges for current services 5,895,620 23,170 5,918,790
Other 1,044,808 1,124 251,284 1,297,216
Total Revenues 69,995,944 1,118,560 15,462,738 21,857,092 108,434,334
EXPENDITURES
Current Operations:
Community development 7,129,785 29,012 4,082,148 2,398,583 13,639,528
Human services 1,153,640 1,153,640
Public safety 37,726,080 46,542 129,330 37,901,952
Transportation 150,568 1,396,175 5,168,784 6,715,527
Environmental support and protection 210,012 803,163 1,764,893 2,778,068
Leisure, cultural and information services 15,802,253 347,444 16,149,697
Policy development and implementation 1,292,137 585,555 1,877,692
Capital outlay 57,381 17,030,835 7,507,298 8,928,727 33,524,241
Debt service:
Principal retirement 42,321 4,620,000 4,662,321
Interest and fiscal charges 74,004 2,683,234 2,757,238
Total Expenditures 63,521,856 20,312,730 11,631,767 25,693,551 121,159,904
EXCESS ( DEFICIENCY) OF REVENUES
OVER EXPENDITURES 6,474,088 ( 19,194,170) 3,830,971 ( 3,836,459) ( 12,725,570)
OTHER FINANCING SOURCES ( USES)
Transfers in 616,240 14,383,298 3,731,601 18,731,139
Transfers ( out) ( 7,390,826) ( 441,431) ( 10,437,792) ( 436,281) ( 18,706,330)
Sale of property 25,387 25,387
Contribution from ( to) other funds 2,600,000 ( 2,600,000)
Gain from sale of land held for redevelopment 230,991 230,991
Total Other Financing Sources ( Uses) ( 6,749,199) 16,541,867 ( 13,037,792) 3,526,311 281,187
NET CHANGE IN FUND BALANCES ( 275,111) ( 2,652,303) ( 9,206,821) ( 310,148) ( 12,444,383)
Fund balances at beginning of period 38,871,904 31,033,066 27,309,938 53,314,053 150,528,961
FUND BALANCES AT END OF PERIOD 38,596,793 28,380,763 18,103,117 53,003,905 138,084,578
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, 2005
The schedule below reconciles the Net Changes in Fund Balances reported on the Governmental Funds Statement of Revenues, Expenditures and Changes in
Fund Balance, which measures only changes in current assets and current liabilities on the modified accrual basis, with the Change in Net Assets of
Governmental Activities reported in the Statement of Activities, which is prepared on the full accrual basis.
$
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS ( 12,444,383)
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. 33,524,241
Depreciation expense is deducted from the fund balance.
( Depreciation expense is net of internal service fund depreciation of
$ 813,768 which has already been allocated to serviced funds.) ( 5,157,415)
Retirements of capital assets ( 115,698)
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. 4,662,321
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):
Non- current portion of compensated absences ( 272,351)
Interest payable 211,938
Interest accreted on capital appreciation debt ( 1,157,427)
Deferred loan revenue 43,921
Amortization of bond premium 31,057
Amortization of issuance costs ( 67,976)
Other ( 115,749)
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 ( 1,678,000)
CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES 17,464,479
See accompanying notes to financial statements
23
24
PROPRIETARY FUND FINANCIAL STATEMENTS
Proprietary funds account for City operations financed and operated in a manner similar to a private
business enterprise. The intent of the City is that the cost of providing goods and services be financed
primarily through user charges.
The concept of major funds established by GASB Statement 34 extends to proprietary funds. The City
has identified the funds below as major proprietary funds in fiscal year 2004/ 05.
GASB 34 does not provide for the disclosure of budget vs. actual comparisons regarding proprietary
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.
CITY OF REDWOOD CITY, CALIFORNIA
PROPRIETARY FUNDS
STATEMENT OF NET ASSETS
JUNE 30, 2005
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 17,204,236 2,089,682 1,000,551 10,974,604 31,269,073 14,742,126
Receivables ( net of allowance for uncollectibles):
Accounts 1,277,781 564,620 1,625 513,445 2,357,471 27,370
Accrued interest 160,998 160,998
Due from other governmental agencies 505,915 505,915 83,931
Inventory of supplies at cost 242,733
Deposits 295,603
Prepaid expenses 1,934 191,104 193,038
Total current assets 18,644,949 3,160,217 1,002,176 11,679,153 34,486,495 15,391,763
Noncurrent assets:
Cash and investments, restricted 28,837,227 1,547,022 30,384,249
Capital assets:
Nondepreciable 5,346,043 927,801 23,390,707 29,664,551
Depreciable buildings, property, equipment
and infrastructure, net 28,460,195 11,903,380 4,928,880 10,525,397 55,817,852 5,579,581
Unamortized bond discounts & issuance costs 770,274 524,632 1,294,906
Investment in sewer authority 18,029,631 18,029,631
Investment in sewage capacity rights 2,046,643 400,000 2,446,643
Advances to South Bayside System Authority 4,378,118 4,378,118
Total noncurrent assets 67,791,857 31,979,654 5,856,681 36,387,758 142,015,950 5,579,581
Total assets 86,436,806 35,139,871 6,858,857 48,066,911 176,502,445 20,971,344
LIABILITIES
Current liabilities:
Accounts payable 3,031,553 427,828 3,560 644,152 4,107,093 617,994
Deposits payable 90,444 12,112 155,698 258,254
Insurance claims payable 8,953,720
Accrued sick leave and vacation - current portion 168,010 90,284 4,516 104,777 367,587 281,466
Environmental liability 4,217,700 4,217,700
Revenue bonds payable - current portion 830,000 210,000 1,040,000
Loans/ leases payable - current portion 23,232 23,232
Deferred revenue 167,082 167,082
Accrued interest payable 477,304 70,811 548,115
Total current liabilities 4,597,311 518,112 20,188 5,593,452 10,729,063 9,853,180
Noncurrent liabilities:
Accrued sick leave and vacation 212,879 145,367 11,985 370,231 465,835
Revenue bonds payable 34,960,000 9,815,000 44,775,000
Loans payable 1,300,000 651,910 1,951,910
Total noncurrent liabilities 35,172,879 145,367 1,311,985 10,466,910 47,097,141 465,835
Total liabilities 39,770,190 663,479 1,332,173 16,060,362 57,826,204 10,319,015
NET ASSETS
Invested in capital assets,
net of related debt 2,394,356 11,903,380 4,556,681 19,744,583 38,599,000 5,579,581
Restricted for capital projects 23,925,160 115,824 24,040,984
Restricted for debt service 2,188,373 1,193,304 3,381,677
Unrestricted 18,158,727 22,573,012 970,003 10,952,838 52,654,580 5,072,748
Total net assets 46,666,616 34,476,392 5,526,684 32,006,549 118,676,241 10,652,329
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, 2005
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 16,311,364 11,355,174 445,723 5,950,512 34,062,773 13,460,953
Total Operating Revenues 16,311,364 11,355,174 445,723 5,950,512 34,062,773 13,460,953
Operating Expenses:
Employee services 3,728,136 2,001,297 149,884 995,393 6,874,710 5,903,497
Maintenance 725,714 497,507 45,788 160,514 1,429,523 1,775,538
Water purchases 6,252,865 6,252,865
Utilities 212,175 136,677 21,172 176,493 546,517 56,055
Contractual services 437,927 6,121,164 7,139 932,144 7,498,374 819,345
Supplies and services 4,046,920 3,582,966 99,011 903,006 8,631,903 1,516,880
Depreciation and amortization 964,769 402,816 97,360 698,867 2,163,812 813,768
Insurance and claims 5,066,065
Total Operating Expenses 16,368,506 12,742,427 420,354 3,866,417 33,397,704 15,951,148
Operating Income ( Loss) ( 57,142) ( 1,387,253) 25,369 2,084,095 665,069 ( 2,490,195)
Nonoperating Revenues ( Expenses):
Gain ( loss) on disposal of equipment ( 40,790) ( 40,790) 60,846
Property taxes 34,081 34,081
Contributions 96,228
Capital contributions 267,294 104,888 372,182 91,877
Interest income 679,091 70,033 25,278 197,228 971,630 396,965
Net increase ( decrease) in fair value of investments ( 11,484) ( 2,600) ( 938) ( 5,233) ( 20,255) ( 14,047)
Interest expense ( 324,184) ( 37,128) ( 561,159) ( 922,471)
Legal settlements 3,272 3,272
Increase ( decrease) in investment in sewer authority ( 1,347,516) ( 1,347,516)
Insurance recovery 170,171
Net Nonoperating Revenues ( Expenses) 343,423 ( 1,012,789) 126,181 ( 406,682) ( 949,867) 802,040
Net Income ( Loss) Before Operating Transfers 286,281 ( 2,400,042) 151,550 1,677,413 ( 284,798) ( 1,688,155)
Transfers in 34,964
Transfers ( out) ( 25,218) ( 9,746) ( 34,964) ( 24,809)
Net Transfers in ( out) ( 25,218) ( 9,746) ( 34,964) 10,155
Change in net assets 261,063 ( 2,409,788) 151,550 1,677,413 ( 319,762) ( 1,678,000)
Total net assets- beginning, restated 46,405,553 36,886,180 5,375,134 30,329,136 118,996,003 12,330,329
Total net assets- ending 46,666,616 34,476,392 5,526,684 32,006,549 118,676,241 10,652,329
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, 2005
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 16,444,233 11,552,272 445,723 5,994,264 34,436,492 13,459,864
Cash payments to suppliers for goods and services ( 8,482,163) ( 9,874,479) ( 139,732) ( 2,579,058) ( 21,075,432) ( 7,159,437)
Cash payments to employees for services ( 3,728,057) ( 1,976,486) ( 147,278) ( 979,089) ( 6,830,910) ( 5,899,152)
Right of way compensation ( 1,570,950) ( 1,054,457) ( 36,527) ( 2,661,934)
Net cash provided by operating activities 2,663,063 ( 1,353,150) 122,186 2,436,117 3,868,216 401,275
Cash flows from noncapital financing activities:
Insurance recovery 170,171
Property taxes 34,081 34,081
Transfers in
Transfers out ( 24,809)
Repayment of advance to capital outlay fund 6,000,000 6,000,000 2,000,000
Net cash provided by noncapital financing activities 6,000,000 34,081 6,034,081 2,145,362
Cash flows from capital and related financing activities:
Acquisition and construction of capital assets ( 3,345,753) ( 163,364) ( 777,472) ( 4,286,589) ( 1,443,547)
Advances to South Bayside System Authority ( 4,378,118) ( 4,378,118)
Legal settlement 3,272 3,272
Principal retirements ( 222,231) ( 222,231)
Interest paid ( 37,128) ( 555,917) ( 593,045)
Contributions 96,228
Unamortized issuance cost 3,557 3,557
Proceeds from sale of equipment 123,309
Bond proceeds 35,176,339 35,176,339
Payments for costs of issuance ( 183,174) ( 183,174)
Net cash used for capital and related financing activities 27,269,294 ( 163,364) ( 37,128) ( 1,548,791) 25,520,011 ( 1,224,010)
Cash flows from investing activities:
Interest and dividends on investment 518,093 70,033 25,278 197,228 810,632 396,965
Net increase ( decrease) in fair value of investments ( 11,484) ( 2,600) ( 938) ( 5,233) ( 20,255) ( 14,047)
Net cash used in investing activities 506,609 67,433 24,340 191,995 790,377 382,918
Net increase ( decrease) in cash and cash equivalents 36,438,966 ( 1,449,081) 143,479 1,079,321 36,212,685 1,705,545
Cash and cash equivalents at beginning of year 9,602,497 3,538,763 857,072 11,442,305 25,440,637 13,036,581
Cash and cash equivalents at end of year 46,041,463 2,089,682 1,000,551 12,521,626 61,653,322 14,742,126
Reconciliation of Net Cash Flow from Operating Activities
Operating income ( loss) ( 57,142) ( 1,387,253) 25,369 2,084,095 665,069 ( 2,490,195)
Adjustments to reconcile operating income to net cash
provided by operating activities:
Depreciation 964,769 402,816 97,360 698,867 2,163,812 813,768
Change in assets and liabilities:
Decrease ( increase) in accounts receivable 132,869 703,013 42,587 878,469 82,596
Decrease ( increase) in due from other governmental agencies ( 505,915) ( 505,915) ( 83,685)
Decrease ( increase) in inventory/ prepaid expenses/ deposits 40,456 9,627 50,083 19,992
Increase ( decrease) in vacation & sick leave payable 79 24,811 1,542 16,304 42,736 4,345
Increase ( decrease) in accounts payable 1,582,529 ( 590,622) ( 3,149) ( 385,738) 603,020 229,048
Increase ( decrease) in customer deposits ( 497) 1,064 ( 30,790) ( 30,223)
Increase in deferred revenue 1,165 1,165
Increase in insurance claims payable 1,825,406
Total adjustments 2,720,205 34,103 96,817 352,022 3,203,147 2,891,470
Net cash provided by operating activities 2,663,063 ( 1,353,150) 122,186 2,436,117 3,868,216 401,275
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 $ 9,746 in fixed assets to
internal service funds.
During the fiscal year the equipment services fund received $ 49,590 and the internal services fund received $ 42,287 in contributed fixed 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, 2005
Agency
Funds
$
ASSETS
Cash and Investments, restricted 8,255,510
Accrued Interest 7,660
Total Assets 8,263,170
LIABILITIES
Accounts Payable 75
Due to Bondholders 7,580,395
Employee Benefit Plans Payable 682,700
Total Liabilities 8,263,170
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, 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 of Redwood 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 was created under the provisions of the
Community Redevelopment Law ( California Health and Safety Code) to redevelop certain areas in the
City of Redwood 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 Redevelopment 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.
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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.
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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, proprietary, and fiduciary 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.
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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 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. As these accrued leaves are paid out annually,
the accrued amounts constitute a current liability in the respective funds.
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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.
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.
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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED)
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, 2005. There is no accrual for unbilled water services as of June 30, 2005; 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.
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.
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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED)
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. 40 - Deposit and Investment Risk Disclosure,
an amendment of GASB Statement No. 3
GASB Statement No. 40 updates the custodial credit risk disclosure requirements of Statement No. 3 and
establishes more comprehensive disclosure requirements addressing other common risks of deposits and
investments of state and local governments, such as credit risk, concentration of credit risk, interest rate
risk, and foreign currency risk.
NOTE 2 – CASH AND INVESTMENTS
A. Cash and Deposits
At June 30, 2005, the carrying amount of the City’s cash and deposits was $ 813,743 and ($ 282,587) at
June 30, 2005 and 2004, respectively. Bank balances before reconciling items were $ 3,029,085 at June
30, 2005. Of the total bank balances, $ 333,964 was insured or held by the City or its agent in the City's
name and $ 2,695,121 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).
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.
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NOTE 2 – CASH AND INVESTMENTS ( CONTINUED)
The following is a summary of pooled cash and investments, including cash and investments with fiscal
agent at June 30, 2005.
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 102,849,064 31,269,073 134,118,137 134,118,137
Restricted Cash and
Investments 39,814,657 30,384,249 70,198,906 8,255,510 78,454,416
Total Cash and Investments 212,572,553
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, 2005, 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 813,743 813,743
Certificates of Deposit 2,750,000 2,750,000
Petty Cash 11,885 11,885
Securities of U. S. Government Treasury Agencies:
Federal Home Loan Bank 19,802,480 13,831,550 5,970,930
Federal Home Loan Mortgage Corporation 14,898,630 11,890,440 3,008,190
Federal National Mortgage Association 30,271,020 18,262,560 12,008,460
Corporate Notes 1,016,190 1,016,190
County of San Mateo Investment Pool 54,881,370 54,881,370
California Local Agency Investment Fund 9,672,819 9,672,819
TOTAL 134,118,137 69,146,007 43,984,550 20,987,580
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.
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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+
Federal Home Loan Bank Aaa AAA AAA
Federal Home Loan Mortgage Corp. 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, 2005 from the fiscal year ended June 30, 2004 amounted to an unrealized
decrease of $ 136,426.
GASB 31 applies to all the City's investments, even if they are held to maturity and redeemed at full face
value. Since the City's policy is to hold all investments to maturity, the fair value adjustments required by
GASB 31 result in accounting gains or losses ( called " recognized" gains or losses) which do not reflect
actual sales of the investments ( called " realized" gains or losses). Thus, recognized gains or losses on an
investment purchased at par will now reflect changes in its value at each succeeding fiscal year- end, but
these recognized gains or losses will net to zero if the investment is held to maturity. By following the
requirements of GASB 31, the City is reporting the amount of resources which would actually have been
available if it had been required to liquidate all its investments at any fiscal year- end.
Maximum Maximum
Maximum Percentage of Investment in
Authorized Investment Type Maturity Portfolio One Issuer
Certificates of Deposit 1 year 7.50% $ 3Million
Banker's acceptances 180 days No limit $ 3Million
Treasury Bills, Notes and Bonds 3 years No limit No limit
Government Agency Securities 3 years No limit No limit
Commercial Paper 15 days No limit $ 1Million
Local Agency Investment Fund N/ A No limit $ 40Million
Passbook Savings Accounts 1 year $ 100,000 $ 100,000
San Mateo County Pool N/ A No limit $ 40Million
Money Market/ Mutual Funds N/ A 10% No limit
Corporate Notes 3 years No limit $ 5Million
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NOTE 2 – CASH AND INVESTMENTS ( CONTINUED)
C. Funds Held by Fiscal Agents
The City had $ 73,418,203 in cash and investments as of June 30, 2005 held by trustees or fiscal agents
pledged for the payment or security of certain bonds, certificates of participation, and lease obligations.
The California government code provides that these monies, in the absence of specific statutory