City of Redwood City
Redwood City, California
Comprehensive Annual
Financial Report
fiscal year ended
June 30, 2004
City of Redwood City
Redwood City, California
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
Fiscal Year Ended June 30, 2004
Prepared by
City of Redwood City Finance Department
City of Redwood City
Redwood City, California
Comprehensive Annual Financial Report
Fiscal Year Ended June 30, 2004
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
Names 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 .................................................................................................... 14
Statement of Activities...................................................................................................... 15
Fund Financial Statements:
Major Governmental Funds:
Balance Sheet.............................................................................................................. 18
Reconciliation of the Governmental Funds – Balance Sheet
With the Statement of Activities................................................................................. 19
Statement of Revenues, Expenditures, and Changes in Fund Balance....................... 20
Reconciliation of the Net Change in Fund Balances –
Total Governmental Funds with the Statement of Activities ..................................... 21
Major Proprietary Funds:
Statement of Net Assets .............................................................................................. 22
Statement of Revenues, Expenses, and Changes in Fund Net Assets ........................ 23
Combining Statement of Cash Flows Increase ( Decrease) in Cash
and Cash Equivalents.................................................................................................. 24
City of Redwood City
Redwood City, California
Comprehensive Annual Financial Report
Fiscal Year Ended June 30, 2004
TABLE OF CONTENTS
_______________________________________________________________________________
II. FINANCIAL SECTION ( Continued) Exhibit Page
Fiduciary Funds:
Statement of Fiduciary Net Assets.............................................................................. 25
Notes to Financial Statements................................................................................................. 26
D. Required Supplementary Information:
General Fund – Schedule of Revenues, Expenditures, and Changes in Fund
Balances – Budget and Actual .......................................................................................... 58
Redevelopment Agency Fund - Schedule of Revenues, Expenditures, and
Changes in Fund Balances – Budget and Actual.............................................................. 59
E. Supplemental Information:
General Fund:
Comparative Balance Sheet .............................................................................................. 62
Comparative Schedule of Revenues, Expenditures, and Changes in Fund Balances –
Budget ( GAAP Basis) and Actual .................................................................................... 63
Schedule of Revenues Compared with Budget ( GAAP Basis) and Actual ...................... 64
Schedule of Expenditures Compared with Budget ( GAAP Basis) and Actual ................ 65
Non- Major Governmental Funds:
Combining Balance Sheets ............................................................................................... 68
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ........ 72
Budgeted Non- Major Funds:
Combining Schedule of Revenues, Expenditures, and Changes in
Fund Balances - Budget and Actual ................................................................................. 76
Internal Service Funds:
Combining Statement of Net Assets ................................................................................. 86
Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets ........... 87
Combining Statement of Cash Flows Increase ( Decrease) in Cash and
Cash Equivalents............................................................................................................... 88
Agency Funds:
Combining Statement of Changes in Assets and Liabilities............................................. 90
City of Redwood City
Redwood City, California
Comprehensive Annual Financial Report
Fiscal Year Ended June 30, 2004
TABLE OF CONTENTS
_______________________________________________________________________________
III. STATISTICAL SECTION Table Page
General Governmental Expenditures by Function or Program -
Last Ten Fiscal Years .................................................................................................. 1 91
General Governmental Revenues by Sources - Last Ten Fiscal Years ....................... 2 92
Property Tax Levies and Collections - Last Ten Fiscal Years .................................... 3 93
State and Locally Assessed Values of Taxable Property - Last Ten Fiscal Years ...... 4 94
Property Tax Rates Direct and Overlapping Governments -
Last Ten Fiscal Years .................................................................................................. 5 95
Special Assessment Collections - Last Ten Fiscal Years ............................................ 6 96
Computation of Legal Debt Margin............................................................................. 7 97
Computation of Direct and Overlapping Debt............................................................. 8 98
Revenue Bond Coverage - Last Ten Fiscal Years ....................................................... 9 99
Construction Values - Last Ten Fiscal Years .............................................................. 10 100
Top Ten Principal Property Taxpayers........................................................................ 11 101
Demographic Statistics - Last Ten Fiscal Years.......................................................... 12 102
Miscellaneous Statistics............................................................................................... 13 103
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1017 Middlefield Road
Redwood City, California 94063
Office of Director of Finance Telephone: ( 650) 780- 7070
and Financial Planning Fax: ( 650) 366- 2447
E- mail: mail@ redwoodcity. org
December 10, 2004
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, 2004.
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. The Government Finance
Officers Association of the United States and Canada ( GFOA) awarded its Certificate of Achievement for
Excellence in Financial Reporting to Redwood City for its 2003 Comprehensive Annual Financial Report. The
California Society of Municipal Finance Officers ( CSMFO) awarded its Outstanding Financial Reporting
Certificate of Award to Redwood City for the same fiscal year. It is our belief that this report fully conforms to
these high standards.
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.
ii
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
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.
MAJOR INITIATIVES
Redwood City sponsors two initiatives whose sole objective is to engage and connect with the people who live and
work here – to build a great community together.
First is the ongoing Partnership Academy for Community Teamwork ( PACT), which began in September, 2002.
This is a free nine- week citizens’ academy providing participants with a hands- on overview of the operation,
management, and governance of Redwood City. At the same time, this program helps to build relationships
between neighbors, residents, and City staff that strengthen our community.
Twice a year, once in the spring and once in the fall, 40 participants gather one evening each week to participate in
interactive and informative activities and presentations on specific departments. They spend time with staff from
those departments offering an opportunity for both group and one- on- one discussion and questions and answers.
Each week’s session includes dinner during which specially- crafted community- based questions are posed for
round- table discussions that are designed to focus on community connections and community action and
involvement. This program has met with great success, based on the evaluation comments that each participant
provides after each session. These participants become, in effect, ambassadors for the City throughout the
community.
Second is a program that began as a ‘ graduate course’ for those that completed the PACT program. It has evolved
into a wider- reaching program entitled ‘ Community Builders.’ This is a free six- session course designed to bring
out citizens’ community- building ideas and dreams, offer theoretical and pragmatic information on how to effect
positive change in our community, present opportunities for people to connect with others of like- mind, and to then
move forward with specific actions for enhancing our streets, blocks, neighborhoods, and communities. As
presenters, the program features internationally- renowned speakers, authors, and thinkers in the field of community
building. The City sponsored this program once in 2004, and will do so again once in 2005.
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
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• 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.
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 2004 was a respectable 3.7%, this low rate does not
reveal the decline in the number of jobs in the county over the past three years ( 420,100 jobs as of June 2001 to
352,500 as of June 2004). It is our hope and expectation the local economy has “ bottomed out” and that the local
economy will soon be participating in the nationwide recovery.
Two new high profile retailers have announced their plans to open establishments later this calendar year or in early
2005. The Jewelry Exchange, a high volume nationwide jewelry retailer, hopes to open a store in Redwood City
before the 2004 holiday season. Also, construction is underway on a Ferrari automobile dealership, which is
expected to open in January 2005. Both of these businesses will generate sales tax revenue for the City and the
decisions to locate here are interpreted as expressions of the confidence that these organizations have in the
economic strength of our area.
Abbot Labs has secured all entitlements to construct a 541,000 square foot office and manufacturing facility in the
City ( subject to the City’s design review process). This project is expected to be built in phases over a 20 year
period with the first phase beginning in 2006.
The first phase of the Westport Marina project, consisting of constructing a 408- slip marina, is under construction
and is expected to be completed before the fall of 2005. A boat repair and maintenance yard, the second phase, is
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anticipated to begin in 2006 or 2007. The third and final phase, 30,000 square feet of commercial buildings that
will house a restaurant and shops, is projected to break ground in 2007 or 2008.
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 ( LAIF), and the County of San Mateo investment pool. Total investment earnings during the
fiscal year amounted to $ 4.0 million. At the end of fiscal year 2003/ 04, the total investments, including cash with
fiscal agents, cash at banks, and petty cash, stood at $ 184,207,731.
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.
The appropriation limit for Redwood City for the fiscal year 2003/ 04 is at $ 198,916,483 while the actual
appropriations subject to the limit amounted to $ 48,698,362. The following graph indicates the trend in
appropriations subject to limitation:
v
$ 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
FY 2001- 02 FY 2002- 03 FY 2003- 04
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, 2003. This is the 17th 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, 2003. This was the 18th 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, Gloria del Rosario, and Jill
Greenhorn for their important contributions, and to Sandy Jennings for her relentless dedication to assembling and
publishing this document.
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CITY OF REDWOOD CITY - REDWOOD CITY, CALIFORNIA
PRINCIPAL OFFICIALS
June 30, 2004
CITY COUNCIL
Jeff Ira, Mayor ......................................................................................... November 2005
Barbara Pierce, Vice Mayor..................................................................... November 2007
Ian Bain.................................................................................................... November 2007
Rosanne Foust.......................................................................................... November 2007
Jim Hartnett.............................................................................................. November 2005
Diane Howard .......................................................................................... November 2005
Ira Ruskin................................................................................................. November 2007
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
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CITY OF REDWOOD CITY - REDWOOD CITY, CALIFORNIA
FINANCE DEPARTMENT STAFF
June 30, 2004
Brian Ponty ......................................................... Director of Finance and Financial Planning
Alison Freeman.................................................... Financial Services Manager
Irvin Weinstock.................................................... Senior Accountant
Kyi Khin............................................................... Senior Accountant
Gloria del Rosario................................................ Senior Accountant
Jill Greenhorn ...................................................... Accountant
Sandy Jennings .................................................... Administrative Assistant
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
City of Redwood City
Comprehensive Annual Financial Report
June 30, 2004
MANAGEMENT’S DISCUSSION AND ANALYSIS
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, 2004. We encourage readers to consider the
information presented here in conjunction with the accompanying transmittal letter and basic financial statements.
FISCAL YEAR 2003/ 04 FINANCIAL HIGHLIGHTS
The City continues to struggle with the effects of the economic slowdown that began in the spring of 2001 and
which hit the technology sector particularly hard. Financial highlights of the year include the following:
• The City’s total net assets increased $ 7.96 million in FY 2003/ 04, after a $ 6.7 million increase in the
preceding year. At June 30, 2004, net assets totaled $ 358.2 million.
• Total City revenues, including program and general revenues, were $ 125.3 million, an increase of $ 5.8
million from the prior year, while total expenses were $ 117.4 million, an increase of $ 4.5 million from the
FY 2002/ 03.
• Net assets in governmental funds increased $ 7.7 million, while net assets in business activities increased
$. 3 million.
• Governmental program revenues were $ 29.1 million, an increase of $ 3.9 million from FY 2002/ 03’ s $ 25.2
million.
• Governmental program expenses increased to $ 85.2 million in FY 2003/ 04, up $ 1.3 million from the prior
year.
• Revenues from business- type activities increased to $ 32.5 million in FY 2003/ 04, up $ 2.6 million from the
prior year.
• Expenses of business- type activities increased to $ 32 million in FY 2003/ 04, a $ 3 million increase from the
prior year.
• General fund revenues of $ 65 million increased by $. 5 million from the prior year.
• General fund balance of $ 38.9 million at the fiscal year end declined by $. 5 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 14- 15 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 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 18- 21 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 page 22- 24 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 25 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 26- 56 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 $ 358 million at June 30, 2004.
City’s Net Assets ( in Millions)
Governmental Business- type
Activities Activities Total
2004 2003 2004 2003 2004 2003 Variance
$ $ $ $ $ $
Cash and investments 145.954 123.862 25.440 23.830 171.394 196.834 - 12.925%
Other assets 38.405 29.811 31.571 32.556 69.976 101.547 - 31.090%
Capital assets 167.242 153.116 82.577 77.660 249.819 332.396 - 24.843%
Total assets 351.601 306.789 139.588 134.046 491.189 630.777 - 22.130%
Long- term debt outstanding 89.108 53.521 12.917 13.082 102.025 66.603 53.184%
Other liabilities 23.334 21.575 7.675 2.868 31.009 24.443 26.862%
Total liabilities 112.442 75.096 20.592 15.950 133.034 91.046 46.117%
Net assets:
Invested in capital assets,
net of debt 113.369 136.507 67.464 66.389 180.833 202.896 - 10.874%
Restricted 99.315 57.991 1.565 1.882 100.880 59.873 68.490%
Unrestricted
Other unrestricted net assets 26.475 36.988 49.967 50.435 76.442 87.423 - 12.561%
Total net assets 239.159 231.486 118.996 118.706 358.155 350.192 2.274%
The largest portion ( 50%) 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 ( 28%) represents resources that are subject to external restrictions on
how they may be used. The remaining balance of unrestricted net assets ($ 76.442 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 $ 7.9 million during the current fiscal year.
MANAGEMENT’S DISCUSSION AND ANALYSIS
7
GOVERNMENTAL ACTIVITIES
Governmental activities increased the City’s net assets by $ 7.7 million, thereby accounting for 96% 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
2004 2003 2004 2003 2004 2003 Variance
Revenues $ $ $ $ $ $
Program revenues:
Community development 4.703 3.953 4.703 3.953 18.973%
Human Services 0.376 0.382 0.376 0.382 - 1.571%
Public safety 4.991 5.698 4.991 5.698 - 12.408%
Transportation 8.700 7.116 8.700 7.116 22.260%
Environmental support and protection 1.809 2.262 1.809 2.262 - 20.027%
Leisure, cultural and information service 6.823 5.141 6.823 5.141 32.717%
Policy development and implementation 1.667 0.599 1.667 0.599 178.297%
Water 16.353 13.870 16.353 13.870 17.902%
Sewer 10.306 9.391 10.306 9.391 9.743%
Parking 0.412 0.457 0.412 0.457 - 9.847%
Port of Redwood City 5.559 4.862 5.559 4.862 14.336%
General revenues:
Taxes/ special assessments 61.594 58.951 0.026 0.026 61.620 58.977 4.481%
Investment earnings 0.484 4.200 0.215 0.921 0.699 5.121 - 86.350%
Other 1.732 1.454 ( 0.419) 0.297 1.313 1.751 - 25.014%
Total revenues 92.879 89.756 32.452 29.824 125.331 119.580 4.809%
Expenses
Community development 13.888 12.831 13.888 12.831 8.238%
Human services 1.255 1.336 1.255 1.336 - 6.063%
Public safety 34.738 32.508 34.738 32.508 6.860%
Transportation 8.626 9.981 8.626 9.981 - 13.576%
Environmental support and protection 1.907 1.817 1.907 1.817 4.953%
Leisure, cultural and information services 18.107 18.899 18.107 18.899 - 4.191%
Policy development and implementation 3.381 4.151 3.381 4.151 - 18.550%
Interest on long term debt 3.344 2.381 3.344 2.381 40.445%
Water 16.773 15.001 16.773 15.001 11.813%
Sewer 10.786 10.653 10.786 10.653 1.248%
Parking 0.449 0.493 0.449 0.493 - 8.925%
Port of Redwood City 4.114 2.803 4.114 2.803 46.771%
Total expenses 85.246 83.904 32.122 28.950 117.368 112.854 4.000%
Change in net assets before transfers 7.633 5.852 0.330 0.874 7.963 6.726 18.391%
T ransfers 0.040 0.293 ( 0.040) ( 0.293)
Change in net assets 7.673 6.145 0.290 0.581 7.963 6.726 18.391%
Net assets - July 1 231.486 225.341 118.706 118.125 350.192 343.466 1.958%
Net assets - June 30 239.159 231.486 118.996 118.706 358.155 350.192 2.274%
Key elements of the increase/ decrease in revenues for governmental activities are as follows:
General governmental revenues increased about 3.5%, or $ 3.123 million from FY 2002/ 03 due primarily to
increases in tax revenues and grants received.
Community development revenues were higher in FY 2003/ 04 due to an increase in development- related grant
revenue. Transportation revenues increased due to contributions from property owners for street improvements.
MANAGEMENT’S DISCUSSION AND ANALYSIS
8
Environmental support and protection revenues declined primarily as a result of declining interest on facilities fees
in General Improvement District 1- 64 as there were no building permits for new building issued in this area in the
last two fiscal years. Leisure, cultural and information services increased primarily due to state grant revenue
received for the new Redwood Shores library project. Policy development and implementation revenues increased
due to the receipt of a donation in the amount of $ 1 million.
Key elements of the increase/ decrease in expenses for governmental activities are as follows:
Total expenses were up 1.6%, or $ 1.342 million due mostly to increases in public safety and community
development. Public safety increases were driven for the most part by higher salary and benefit costs while
community development expenses were higher because of increased activity of the Redevelopment Agency.
Interest on long term debt increased due to the interest expense related to new bond issues. These increases were
offset by budget reductions in other programs of the City along with a decrease in policy development and
implementation expenditures resulting from increased reimbursements from other funds, particularly the
Redevelopment Agency.
BUSINESS- TYPE ACTIVITIES
Business- type activities increased the City’s net assets by $ 290,000 in FY 2003/ 04, or about 3.6% of the City’s
increase in net assets.
Key elements accounting for increases or decreases in revenues and expenses are as follows:
Business- type revenues were higher in FY 2003/ 04 than the previous year as the increase in water and sewer rates
increased revenues. Investment earnings declined significantly due to the decrease in fair value of investments.
Other general revenues declined due to a decrease in the investment in the sewer authority.
The water utility’s expenses were significantly higher (+ 11.8%) in FY 2003/ 04 due to an increase of $ 1.7 million
paid to the San Francisco Water Department for water purchases, and higher professional services in FY 2003/ 04.
The Port of Redwood City experienced a 46.8% increase in expenses due to increased interest expense and loss on
disposal of equipment.
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, 2004, the City’s governmental funds reported combined fund balances of $ 150.5 million, which is an
increase of $ 29.3 million from the beginning year balance of $ 121.2 million. This increase was primarily due to
bond proceeds of the Redevelopment Agency issued in connection with downtown revitalization efforts.
Governmental fund revenues increased $. 5 million this year to a new total of $ 90 million. The general fund
accounted for most of this increase, with the capital outlay fund and redevelopment agency fund accounting for the
remainder. Expenditures, including capital outlay, increased $ 9.8 million this year to a new total of $ 102.6 million.
Most of the increase was attributable to an increase in capital outlay expenditures as the Redevelopment Agency
undertook construction of the underground parking garage and other related downtown improvements.
The general fund is the chief operating fund of the City. At June 30, 2004, unreserved fund balance of the general
fund was $ 34.3 million of which $ 16.9 million is available for subsequent years’ expenditures while total fund
balance reached $ 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
MANAGEMENT’S DISCUSSION AND ANALYSIS
9
57% of total fund expenditures, while total fund balance represents 65% of that same amount. The fund balance of
the City’s general fund decreased by $. 5 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
$ 1.5 million as assessed valuations rose 1.2%, reflecting continued development in the City, increased prices for
existing residential properties, and large payments due to prior year’s supplemental taxes, along with
reimbursement from San Mateo County for prior year payments to the Education Revenue Augmentation Fund.
General fund expenditures increased $. 5 million due to increased public safety expenditures as a result of higher
salaries and benefits in the amount of $ 2 million offset by budget reductions in various City programs. Even so,
expenditures were less than budgeted and represented an increase of .9% in FY 2003/ 04, to a total of $ 60 million.
Transfers out of the general fund decreased $ 1.5 million in FY 2003/ 04 as a result of transferring amounts in FY
2002/ 03 to fund capital projects.
Capital Outlay Fund - This fund accounts for resources provided to finance general governmental capital projects.
In FY 2003/ 04, the capital outlay fund generated $ 2.9 million in revenue, most of which was from a state library
grant. This fund was also the recipient of $ 5.1 million of transfers from the general fund, and $ 11.5 million of bond
proceeds. Total outlays were $ 4 million of which $ 1.4 million met with City’s criteria for capitalization. The
balance ($ 2.6 million) was expended in FY 2003/ 04. Total outlays in the prior year ( FY 2002/ 03) were $ 8.3
million. All of the capital outlay fund’s $ 31 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 increased by $ 20.3 million primarily due to bond proceeds
from bonds issued for the downtown revitalization efforts.
Proprietary Funds
Enterprise fund net assets totaled $ 119.0 million at the end of the fiscal year, an increase of $. 3 million over the
prior year. Enterprise operating revenues were $ 32.3 million this year, an increase of $ 3.8 million from last year,
while net non- operating revenues were $(. 8) million compared to $ 1.2 million the prior year.
Enterprise fund operating expenses were $ 31.2 million this year, up $ 2.6 million from the prior year, most of which
was due to higher operating expenses in the water and Port of Redwood City funds.
Water Utility - Net assets of the water utility fund decreased $. 3 million in the current year to a total of $ 46.4
million.
Sewer Utility - The sewer utility fund incurred an operating loss of $. 6 million in the current year, down from the
operating loss of $ 1.2 in the prior year. Revenues increased by $. 9 million while expenses increased $. 2 million
over the prior year. Non- operating revenues declined by $. 6 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 decreased by $ 45,000 this year to $ 413,000, while operating expenses
decreased to $ 430,000, a decrease of $ 37,000. Net non- operating revenues ( expenses) declined from $ 28,600 in FY
2002/ 03 to $ 9,817 in FY 2003/ 04 primarily as a result of a drop in interest expense attributable to a variable rate
loan, combined with the decrease in the fair value of investments.
MANAGEMENT’S DISCUSSION AND ANALYSIS
10
Port Fund - Operating revenues were up 10.5% while operating expenses were up 18.2% from FY 2002/ 03. Non-operating
revenues ( expenses) were down 159% primarily due to increased interest expense and loss on disposal of
capital assets. Overall, net assets increased from $ 28.6 million to $ 30.3 million, 6%.
GENERAL FUND BUDGETARY HIGHLIGHTS
Property taxes exceeded budget by $ 1.8 million primarily due to the receipt of a $ 1.1 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 $ 2.3 million mostly due to better than anticipated sales tax revenue ($ 1.3
million), higher utility users’ taxes ($ 0.4 million), and transient occupancy taxes ($ 0.2 million).
Motor vehicle in lieu tax payments were $ 1.1 million less than budgeted due to the State of California reducing the
tax rate on vehicle registrations and not backfilling the reduced revenues to local government.
Expenditures, overall, were $ 1.6 million less than budgeted as departments exercised greater fiscal restraint with
discretionary expenditures because of the City’s difficult financial condition.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets - At the end of FY 2003/ 04, the City had $ 249.8 million, net of depreciation, invested in a broad
range capital assets used in governmental activities, as shown in the table below:
Capital Assets at Year- end ( in Millions)
Governmental Business- Type
Activities Activities Total
2004 2003 2004 2003 2004 2003 Variance
$ $ $ $ $ $
Land 11.581 11.577 3.448 3.448 15.029 15.025 0.027%
Streets 60.304 60.304 60.304 60.304 0.000%
Construction in progress 48.463 33.917 23.851 18.343 72.314 52.260 38.374%
Buildings 56.024 56.024 9.498 9.299 65.522 65.323 0.305%
Equipment 15.289 16.030 2.002 2.003 17.291 18.033 - 4.115%
Improvements 76.767 76.119 76.767 76.119 0.851%
Harbor improvements 3.292 3.292 3.292 3.292 0.000%
Parks, bridges, etc. 19.488 18.829 19.488 18.829 3.500%
Traffic signals 1.968 1.968 1.968 1.968 0.000%
Storm drains 7.015 2.914 7.015 2.914 140.734%
Less accumulated depreciation ( 52.891) ( 48.447) ( 36.281) ( 34.442) ( 89.172) ( 82.889) 7.580%
Total capital assets 167.241 153.116 82.577 78.062 249.818 231.178 8.063%
Governmental Activities
The substantial ( 43%) increase in construction in progress is driven for the most part by Redevelopment Agency
construction projects in connection with downtown revitalization efforts. The increase in Parks resulted from
renovation of an existing park. Storm Drains capital assets increased due to the relocation of the downtown culvert
in preparation for the construction of the downtown underground parking garage.
Business- Type Activities
The $ 5.5 million increase in Construction in Progress resulted primarily from the environmental remediation of the
liquid bulk terminal facility at the Port.
MANAGEMENT’S DISCUSSION AND ANALYSIS
11
Long- Term Debt - Issues described in detail in Notes 6 and 7 to Financial Statements. During FY 2003/ 04 the
City’s Public Financing Authority issued $ 11.475 million of revenue bonds, and the Redevelopment Agency issued
$ 33.997 million of tax allocation bonds.
Outstanding Debt ( in Millions)
Governmental Business- Type
Activities Activities Total
2004 2003 2004 2003 2004 2003 Variance
$ $ $ $ $ $
Revenue bonds 30.774 27.915 10.225 10.415 40.999 38.330 6.963%
General improvement bonds 5.625 7.175 5.625 7.175 - 21.603%
Tax increment bonds 44.890 11.010 44.890 11.010 307.720%
Loans 0.381 0.423 1.997 2.018 2.378 2.441 - 2.581%
Accrued sick leave and vacation 7.438 6.998 0.695 0.649 8.133 7.647 6.355%
Total long term debt 89.108 53.521 12.917 13.082 102.025 66.603 53.184%
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, 2004, a total of $ 38 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, 2004 there were an
estimated 352,500 jobs. This latter amount is slightly below the estimated number of jobs ( 359,500) as of June 30,
2003, 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 2002/ 03 to FY 2003/ 04, sales tax revenues have increased 4.34% from $ 15.1 million to $ 15.7 million, transient
occupancy taxes have increased 18.3% from $ 1.55 million to $ 1.84 million ( resulting from a voter- approved
transient occupancy tax rate increase from 8% to 10%) while development related revenues have declined 6.6%
from $ 2.05 million in FY 2002/ 03 to $ 1.92 million in FY 2003/ 04.
According to information published by BT Commercial Real Estate, the vacancy rate for commercial office space
in San Mateo County was 24.6% as of September 30, 2004. By comparison, in 1999 the vacancy rate for
commercial office space was 1.2%. Redwood City currently had over 3.1 million square feet of vacant office space
out of a total inventory of 9.9 million square feet as of September 30. Despite the current economic malaise, City
MANAGEMENT’S DISCUSSION AND ANALYSIS
12
staff remains optimistic that local business activity will soon revive and that the City’s revenues will respond
accordingly.
The City's economy is diversified and is not dependent on any single industry or a segment of economic activity.
We have high- technology companies ( Ampex, Harris Corporation/ Microwave Divison, Broadvision, Electronic
Arts, and Oracle), manufacturing ( Tyco Electronics), biotechnology ( Maxygen, Perclose, 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. 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. Notwithstanding the
economic situation, this diversity of economic activity will help Redwood City recover and position the City to
participate in the long- term economic growth that is certain to occur.
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
13
STATEMENT OF NET ASSETS AND STATEMENT OF ACTIVITIES
The Statement of Net Assets and the Statement of Activities are entirely new 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 new 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, 2004
Governmental Business- Type
Activities Activities Total
$ $ $
ASSETS
Cash and investments available for operations 118,707,579 23,637,138 142,344,717
Cash and investments, restricted 27,245,998 1,803,499 29,049,497
Receivables ( net of allowance for uncollectibles):
Taxes and assessments - current 4,951,871 4,951,871
Accounts 1,230,022 3,235,940 4,465,962
Loans 12,447,435 12,447,435
Accrued interest 1,111,917 1,111,917
Due from other governmental agencies 5,508,951 5,508,951
Inventory of supplies at cost 514,042 42,390 556,432
Internal balances ( 6,000,000) 6,000,000
Deposits 1,348,784 1,348,784
Prepaid expenses 11,128 200,731 211,859
Investment in land held for redevelopment 15,592,818 15,592,818
Capital assets:
Nondepreciable 60,044,826 27,298,958 87,343,784
Depreciable buildings, property, equipment and infrastructure, net 107,196,588 55,277,653 162,474,241
Unamortized bond discounts & issuance costs 1,688,756 535,098 2,223,854
Investment in sewer authority 19,716,828 19,716,828
Investment in sewage capacity rights 1,839,668 1,839,668
Total assets 351,600,715 139,587,903 491,188,618
LIABILITIES
Accounts payable 7,413,069 3,504,073 10,917,142
Accrued interest payable 1,781,153 72,478 1,853,631
Accrued payroll 2,695,501 2,695,501
Deposits payable 3,487,712 288,477 3,776,189
Insurance claims payable 7,128,314 7,128,314
Deferred revenue 828,755 165,917 994,672
Accrued sick leave and vacation 7,437,603 695,082 8,132,685
Environmental liability 3,643,500 3,643,500
Long- Term Debt:
Due in one year 4,693,378 222,231 4,915,609
Due in more than one year 76,976,615 12,000,142 88,976,757
Total liabilities 112,442,100 20,591,900 133,034,000
NET ASSETS
Invested in capital assets, net of related debt 113,368,966 67,463,967 180,832,933
Restricted for:
Capital projects 47,395,866 394,578 47,790,444
Debt service 7,245,659 1,170,526 8,416,185
Community development projects 41,342,992 41,342,992
Other purposes 3,330,068 3,330,068
Total restricted net assets 99,314,585 1,565,104 100,879,689
Unrestricted net assets 26,475,064 49,966,932 76,441,996
Total unrestricted net assets 26,475,064 49,966,932 76,441,996
Total net assets 239,158,615 118,996,003 358,154,618
See accompanying notes to financial statements
14
CITY OF REDWOOD CITY, CALIFORNIA
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2004
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 13,761,821 126,300 2,524,334 1,991,823 187,242 ( 9,184,722) ($ 9,184,722)
Human services 1,255,484 376,255 ( 879,229) ( 879,229)
Public safety 34,737,587 1,630,877 1,284,995 2,075,235 ( 29,746,480) ( 29,746,480)
Transportation 8,626,048 184,981 1,518,329 6,997,591 74,853 74,853
Environmental support and protection 1,894,063 13,394 1,135,294 673,757 ( 98,406) ( 98,406)
Leisure, cultural and information services 18,085,468 21,741 2,751,650 1,384,732 2,686,503 ( 11,284,324) ( 11,284,324)
Policy development and implementation 4,575,064 ( 1,194,353) 646,589 14,195 1,005,522 ( 1,714,405) ( 1,714,405)
Interest on long term debt 3,344,344 ( 3,344,344) ( 3,344,344)
Total Governmental Activities 86,279,879 ( 1,032,918) 8,873,725 6,570,329 13,625,850 ( 56,177,057) ( 56,177,057)
Business- Type Activities:
Water Utility Fund 16,190,822 582,294 16,352,876 ( 420,240) ( 420,240)
Sewer Utility Fund 10,374,366 411,967 10,223,204 83,009 ( 480,120) ( 480,120)
Parking Fund 409,941 38,657 412,521 ( 36,077) ( 36,077)
Port of Redwood City 4,113,896 5,341,727 216,870 1,444,701 1,444,701
Total Business- Type Activities 31,089,025 1,032,918 32,330,328 299,879 508,264 508,264
Total 117,368,904 41,204,053 6,570,329 13,925,729 ( 56,177,057) 508,264 ( 55,668,793)
General revenues:
Taxes:
Property taxes 28,435,572 26,095 28,461,667
Sales taxes 15,745,034 15,745,034
Other taxes 17,458,115 17,458,115
Investment Earnings 484,019 215,312 699,331
Increase ( decrease) in investment in sewer authority ( 651,467) ( 651,467)
Other 1,687,645 231,730 1,919,375
Transfers 39,536 ( 39,536)
Total general revenues and transfers 63,849,921 ( 217,866) 63,632,055
Change in Net Assets 7,672,864 290,398 7,963,262
Net Assets- Beginning, as restated 231,485,751 118,705,605 350,191,356
Net assets- Ending 239,158,615 118,996,003 358,154,618
See accompanying notes to financial statements
15
16
City of Redwood City
Comprehensive Annual Financial Report
June 30, 2004
17
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 2004.
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, 2004
Capital Redevelopment Other Total
General Outlay Agency Governmental Governmental
Fund Fund Fund Funds Funds
$ $ $ $ $
ASSETS
Cash and investments available for operation 37,614,194 5,502,676 26,200,672 36,053,169 105,370,711
Cash and investments, restricted 18,440,594 8,805,404 27,245,998
Receivables ( net of allowance for uncollectibles)
Taxes and assessments - curren 4,738,888 212,983 4,951,871
Accounts 1,071,317 3,028 45,711 1,120,056
Loans 3,248,570 1,300,000 1,257,778 6,641,087 12,447,435
Accrued interest 634,772 5,708 86,472 85,456 812,408
Due from other governmental agencie 1,311,846 3,088,242 1,108,617 5,508,705
Inventory of supplies at cos 256,001 256,001
Advances to other funds 90,700 90,700
Deposits 971,284 377,500 1,348,784
Prepaid expenditures 11,128 11,128
Investment in land held for redevelopmen 10,342,238 2,600,000 2,650,580 15,592,818
Total Assets 48,977,416 39,653,770 30,144,922 55,980,507 174,756,615
LIABILITIES
Accounts payable 1,813,897 424,540 2,820,362 1,965,324 7,024,123
Accrued payroll 2,695,501 2,695,501
Deposits payable 3,378,323 47,500 2,979 58,910 3,487,712
Due to other funds 8,000,000 8,000,000
Deferred revenue 688,179 148,664 74,478 911,321
Deferred loan revenue 11,643 477,042 488,685
Advances from other funds 90,700 90,700
Accrued sick leave and vacation - curren 1,529,612 1,529,612
Total Liabilities 10,105,512 8,620,704 2,834,984 2,666,454 24,227,654
FUND BALANCES
Reserved for:
Encumbrances 676,810 2,205,554 11,198,017 11,796,447 25,876,828
Loans 3,248,570 1,300,000 1,246,135 6,164,045 11,958,750
Land held for redevelopmen 10,342,238 2,600,000 2,650,580 15,592,818
Low income housing 2,789,592 2,789,592
Inventory 256,001 256,001
Prepaid expenditures 11,128 11,128
Advances to other funds 90,700 90,700
Debt service 7,225,698 7,225,698
General reserve 250,000 250,000
Unreserved, reported in
General fund 34,338,695 34,338,695
Special revenue funds 12,265,786 13,290,791 25,556,577
Debt service funds 4,912 4,912
Capital projects funds 17,185,274 9,391,988 26,577,262
TOTAL FUND BALANCES 38,871,904 31,033,066 27,309,938 53,314,053 150,528,961
Total Liabilities and Fund Balances 48,977,416 39,653,770 30,144,922 55,980,507 174,756,615
See accompanying notes to financial statement
18
CITY OF REDWOOD CITY, CALIFORNIA
RECONCILIATION OF THE
GOVERNMENTAL FUNDS - BALANCE SHEET
WITH THE STATEMENT OF ACTIVITIES
JUNE 30, 2004
$
TOTAL FUND BALANCES -- TOTAL GOVERNMENTAL FUNDS 150,528,961
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 162,355,990
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 12,330,329
ACCRUAL OF NON- CURRENT REVENUES AND EXPENSES
Revenues in the statement of activities that do not provide current financial resources are not report
as revenues in the funds 870,760
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 1,688,756
Long- term debt ( 81,669,993)
Interest payable ( 1,781,153)
Non- current portion of accrued sick leave and vacation ( 5,165,035)
NET ASSETS OF GOVERNMENTAL ACTIVITIES 239,158,615
See accompanying notes to financial statement
19
CITY OF REDWOOD CITY, CALIFORNIA
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
FOR THE YEAR ENDED JUNE 30, 2004
Capital Redevelopment Other Total
General Outlay Agency Governmental Governmental
Fund Fund Fund Funds Funds
$ $ $ $ $
REVENUES
Property taxes/ special assessments 20,436,178 6,195,167 4,930,162 31,561,507
Sales and other taxes 28,165,797 28,165,797
Licenses and permits 938,403 938,403
Fines, forfeitures and penalties 550,054 295,711 845,765
Use of money and property 1,640,939 424,059 648,128 3,302,506 6,015,632
Net increase ( decrease) in fair value of investments ( 965,802) ( 168,864) ( 798,116) ( 973,451) ( 2,906,233)
Intergovernmental 7,064,233 2,686,503 6,965,453 16,716,189
Developers contributions 184,278 184,278
Charges for current services 6,118,528 109,482 6,228,010
Other 1,093,352 1,124,980 2,218,332
Total Revenues 65,041,682 2,941,698 6,045,179 15,939,121 89,967,680
EXPENDITURES
Current Operations:
Community development 7,197,569 39,696 3,908,815 2,377,470 13,523,550
Human services 1,168,728 1,168,728
Public safety 32,974,488 195,190 189,107 33,358,785
Transportation 188,650 1,101,188 4,124,617 5,414,455
Environmental support and protection 209,791 207,265 1,480,740 1,897,796
Leisure, cultural and information services 16,228,181 146,102 16,374,283
Policy development and implementation 1,955,610 844,524 2,800,134
Capital outlay 88,786 1,389,780 13,296,375 4,766,419 19,541,360
Debt service:
Principal retirement 42,321 4,455,000 4,497,321
Interest and fiscal charges 122,363 2,100,054 2,222,417
Bond issuance costs 1,255,837 500,895 1,756,732
Total Expenditures 60,011,803 4,046,108 18,503,348 19,994,302 102,555,561
EXCESS ( DEFICIENCY) OF REVENUES
OVER EXPENDITURES 5,029,879 ( 1,104,410) ( 12,458,169) ( 4,055,181) ( 12,587,881)
OTHER FINANCING SOURCES ( USES)
Transfers in 791,638 5,174,415 10,857 11,386,081 17,362,991
Transfers ( out) ( 6,333,061) ( 8,304,516) ( 2,183,271) ( 436,912) ( 17,257,760)
Sale of property 4,700 4,700
Bond proceeds 11,479,573 34,920,588 46,400,161
Contribution from property owners, bond proceeds 2,173,188 2,173,188
Payment to bond refunding escrow agent ( 6,725,000) ( 6,725,000)
Total Other Financing Sources ( Uses) ( 5,536,723) 8,349,472 32,748,174 6,397,357 41,958,280
NET CHANGE IN FUND BALANCES ( 506,844) 7,245,062 20,290,005 2,342,176 29,370,399
Fund balances at beginning of period 39,378,748 23,788,004 7,019,933 50,971,877 121,158,562
FUND BALANCES AT END OF PERIOD 38,871,904 31,033,066 27,309,938 53,314,053 150,528,961
See accompanying notes to financial statements
20
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, 2004
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 29,370,399
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. 19,541,360
Depreciation expense is deducted from the fund balance.
( Depreciation expense is net of internal service fund depreciation of
$ 737,223 which has already been allocated to serviced funds.) ( 4,986,718)
Retirements of capital assets ( 5,399)
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. 4,497,321
Payments to the bond refunding agent 6,725,000
Refunding bonds issued, including a premium of $ 4,573 ( 11,479,573)
Tax allocation bonds issued, including a premium of $ 923,140 ( 34,920,588)
Deferral of costs of issuance 1,756,732
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 ( 559,836)
Interest payable and interest accreted on capital appreciation debt ( 1,121,927)
Deferred loan revenue 38,552
Amortization of bond premium 31,057
Amortization of issuance costs ( 67,976)
Other ( 2,010)
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 ( 1,143,530)
CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES 7,672,864
See accompanying notes to financial statements
21
CITY OF REDWOOD CITY, CALIFORNIA
PROPRIETARY FUNDS
STATEMENT OF NET ASSETS
JUNE 30, 2004
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 9,602,497 3,538,763 857,072 9,638,806 23,637,138 13,336,868
Receivables ( net of allowance for uncollectibles):
Accounts 1,410,650 1,267,633 1,625 556,032 3,235,940 109,966
Due from other governmental agencies 246
Due from other funds 6,000,000 6,000,000 2,000,000
Inventory of supplies at cost 42,390 42,390 258,041
Prepaid expenses 200,731 200,731
Total current assets 17,055,537 4,806,396 858,697 10,395,569 33,116,199 15,705,121
Noncurrent assets:
Cash and investments, restricted 1,803,499 1,803,499
Capital assets:
Nondepreciable 2,827,525 736,871 822,913 22,911,649 27,298,958
Depreciable buildings, property, equipment
and infrastructure, net 28,443,266 11,415,707 5,026,240 10,392,440 55,277,653 4,885,424
Unamortized bond discounts & issuance costs 535,098 535,098
Investment in sewer authority 19,316,828 400,000 19,716,828
Investment in sewage capacity rights 1,839,668 1,839,668
Total noncurrent assets 31,270,791 33,309,074 5,849,153 36,042,686 106,471,704 4,885,424
Total assets 48,326,328 38,115,470 6,707,850 46,438,255 139,587,903 20,590,545
LIABILITIES
Current liabilities:
Accounts payable 1,449,024 1,018,450 6,709 1,029,890 3,504,073 388,946
Deposits payable 90,941 11,048 186,488 288,477
Insurance claims payable 7,128,314
Accrued sick leave and vacation 380,810 210,840 14,959 88,473 695,082 742,956
Environmental liability 3,643,500 3,643,500
Revenue bonds payable - current portion 200,000 200,000
Loans/ leases payable - current portion 22,231 22,231
Deferred revenue 165,917 165,917
Accrued interest payable 72,478 72,478
Total current liabilities 1,920,775 1,229,290 32,716 5,408,977 8,591,758 8,260,216
Proprietary fund long- term debt 1,300,000 10,700,142 12,000,142
Total liabilities 1,920,775 1,229,290 1,332,716 16,109,119 20,591,900 8,260,216
NET ASSETS
Invested in capital assets,
net of related debt 31,270,791 12,152,578 4,549,153 19,491,445 67,463,967 4,885,424
Restricted for capital projects 394,578 394,578
Restricted for debt service 1,170,526 1,170,526
Unrestricted 15,134,762 24,733,602 825,981 9,272,587 49,966,932 7,444,905
Total net assets 46,405,553 36,886,180 5,375,134 30,329,136 118,996,003 12,330,329
See accompanying notes to financial statements
22
CITY OF REDWOOD CITY, CALIFORNIA
PROPRIETARY FUNDS
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN FUND NET ASSETS
FOR THE YEAR ENDED JUNE 30, 2004
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 16,352,876 10,223,204 412,521 5,341,727 32,330,328 11,981,485
Total Operating Revenues 16,352,876 10,223,204 412,521 5,341,727 32,330,328 11,981,485
Operating Expenses:
Employee services 3,522,820 1,726,235 148,596 933,142 6,330,793 5,814,479
Maintenance 779,829 455,862 59,920 92,781 1,388,392 1,531,320
Water purchases 6,815,529 6,815,529
Utilities 222,070 162,910 23,401 178,816 587,197 53,030
Contractual services 467,018 5,789,598 12,956 902,462 7,172,034 819,558
Supplies and services 3,944,043 2,254,415 87,827 654,338 6,940,623 1,111,791
Depreciation and amortization 946,954 397,313 97,360 506,322 1,947,949 737,223
Insurance and claims 3,212,486
Total Operating Expenses 16,698,263 10,786,333 430,060 3,267,861 31,182,517 13,279,887
Operating Income ( Loss) ( 345,387) ( 563,129) ( 17,539) 2,073,866 1,147,811 ( 1,298,402)
Nonoperating Revenues ( Expenses):
Gain ( loss) on disposal of equipment ( 275,898) ( 275,898) 4,908
Property taxes 26,095 26,095
Contributions 83,009 216,870 299,879 96,301
Interest income 378,183 108,377 23,093 103,241 612,894 427,848
Net increase ( decrease) in fair value of investments ( 258,382) ( 97,771) ( 20,833) ( 20,596) ( 397,582) ( 358,382)
Interest expense ( 74,853) ( 18,538) ( 570,137) ( 663,528)
Legal settlements 231,730 231,730
Increase ( decrease) in investment in sewer authority ( 651,467) ( 651,467)
Insurance recovery 49,892
Net Nonoperating Revenues ( Expenses) 44,948 ( 557,852) 9,817 ( 314,790) ( 817,877) 220,567
Net Income ( Loss) Before Operating Transfers ( 300,439) ( 1,120,981) ( 7,722) 1,759,076 329,934 ( 1,077,835)
Transfers in 1,450,000
Transfers ( out) ( 24,389) ( 15,147) ( 39,536) ( 1,515,695)
Net Transfers in ( out) ( 24,389) ( 15,147) ( 39,536) ( 65,695)
Change in net assets ( 324,828) ( 1,136,128) ( 7,722) 1,759,076 290,398 ( 1,143,530)
Total net assets- beginning, restated 46,730,381 38,022,308 5,382,856 28,570,060 118,705,605 13,473,859
Total net assets- ending 46,405,553 36,886,180 5,375,134 30,329,136 118,996,003 12,330,329
See accompanying notes to financial statements
23
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, 2004
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 16,055,965 10,914,457 410,995 5,180,155 32,561,572 11,967,531
Cash payments to suppliers for goods and services ( 10,382,915) ( 7,030,081) ( 135,513) ( 1,786,916) ( 19,335,425) ( 6,616,140)
Cash payments to employees for services ( 3,511,618) ( 1,715,573) ( 144,432) ( 912,470) ( 6,284,093) ( 5,776,006)
Right of way compensation ( 1,264,292) ( 920,833) ( 42,703) ( 2,227,828)
Net cash provided by operating activities 897,140 1,247,970 88,347 2,480,769 4,714,226 ( 424,615)
Cash flows from noncapital financing activities:
Insurance recovery 49,892
Property taxes 26,095 26,095
Transfers in 1,450,000
Transfers out ( 1,515,695)
Net cash provided by noncapital financing activities 26,095 26,095 ( 15,803)
Cash flows from capital and related financing activities:
Acquisition and construction of capital assets ( 1,637,270) ( 638,034) ( 861,403) ( 3,136,707) ( 289,158)
Legal settlement 231,730 231,730
Principal retirements ( 211,274) ( 211,274)
Interest paid ( 74,853) ( 18,538) ( 565,139) ( 658,530)
Contributions 216,870 216,870
Unamortized issuance cost 3,380 3,380
Proceeds from sale of equipment 2,068 2,068 77,477
Net cash used for capital and related financing activities ( 1,712,123) ( 638,034) ( 18,538) ( 1,183,768) ( 3,552,463) ( 211,681)
Cash flows from investing activities:
Interest and dividends on investment 378,183 108,377 23,093 103,241 612,894 427,848
Net increase ( decrease) in fair value of investments ( 258,382) ( 97,771) ( 20,833) ( 20,596) ( 397,582) ( 358,382)
Net cash used in investing activities 119,801 10,606 2,260 82,645 215,312 69,466
Net increase ( decrease) in cash and cash equivalents ( 695,182) 620,542 98,164 1,379,646 1,403,170 ( 582,633)
Cash and cash equivalents at beginning of year 10,297,679 2,918,221 758,908 10,062,659 24,037,467 13,919,501
Cash and cash equivalents at end of year 9,602,497 3,538,763 857,072 11,442,305 25,440,637 13,336,868
Reconciliation of Net Cash Flow from Operating Activities
Operating income ( loss) ( 345,387) ( 563,129) ( 17,539) 2,073,866 1,147,811 ( 1,298,402)
Adjustments to reconcile operating income to net cash
provided by operating activities:
Depreciation 946,954 397,313 97,360 506,322 1,947,949 737,223
Change in assets and liabilities:
Decrease ( increase) in accounts receivable ( 296,911) 691,253 ( 1,526) ( 138,238) 254,578 ( 14,480)
Decrease ( increase) in due from other governmental agencies 526
Decrease ( increase) in inventory/ prepaid expenses/ deposits 128,990 23,796 152,786 ( 6,075)
Increase ( decrease) in vacation & sick leave payable 11,202 10,662 3,360 20,672 45,896 38,473
Increase ( decrease) in accounts payable 418,038 711,871 5,888 ( 77,554) 1,058,243 778
Increase ( decrease) in customer deposits 34,254 804 95,239 130,297
Increase in deferred revenue ( 23,334) ( 23,334)
Increase in insurance claims payable 117,342
Total Adjustments 1,242,527 1,811,099 105,886 406,903 3,566,415 873,787
Net cash provided by operating activities 897,140 1,247,970 88,347 2,480,769 4,714,226 ( 424,615)
See accompanying notes to financial statements
Non- cash financing activity: During the fiscal year the Water Utility Fund transferred $ 24,389 and the Sewer Utility Fund transferred $ 15,147 in fixed assets to
governmental funds.
24
CITY OF REDWOOD CITY
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET ASSETS
JUNE 30, 2004
Agency
Funds
$
ASSETS
Cash and Investments, restricted 12,813,517
Total Assets 12,813,517
LIABILITIES
Due to Bondholders 12,148,224
Employee Benefit Plans Payable 665,293
Total Liabilities 12,813,517
See accompanying notes to financial statements
25
26
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 Redwood City Redevelopment Agency was established in 1984 by City Council to eliminate blight
within the defined project areas by encouraging and assisting planned development of low income
housing and commercial projects.
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 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.
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.
27
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.
28
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. 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.
29
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED)
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. Budgets and Budgetary Accounting
Formal budgetary integration is employed as a management control device during the year for the general
fund, special revenue funds, debt service funds, and capital projects funds.
Budgets for the general, special revenue, debt service, and capital projects funds ( except the General
Improvement District 1965 construction fund) are adopted on a basis consistent with generally accepted
accounting principles ( GAAP), except for capital outlay in special revenue and capital projects funds,
which is budgeted on a project length basis.
The City Manager submits a recommended operating budget in May each year to the City Council for the
fiscal year commencing the following July 1, showing proposed expenditures by programs and the means
of financing them.
The City Council conducts budget study sessions, which are open for public comment, before adopting
the budget. Once the budget is adopted, expenditures may not legally exceed appropriations at program
level except when the excess is attributable to a particular activity for which the City has been
reimbursed. This is especially apparent in the Community Development Program where developers
reimburse the City through sub- division fees and environmental impact report fees.
At the request of the department head through the City Manager, the City Council may, by resolution,
transfer appropriations between sub- programs and funds, but shall not change total appropriations. Any
increase or decrease to the total appropriations provided for in the budget must be carried through by
ordinance passed by the City Council. The City Manager may authorize the transfer of funds between
object categories within a sub- program of a department. The adoption and administration of the Port of
Redwood City budget, unless property tax revenues are requested, is exclusively under the control of the
Board of Port Commissioners.
30
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED)
Budgeted amounts are as originally adopted, or as amended by the City Council during the fiscal year.
Individual amendments were not material in relation to the original appropriations.
All unexpended appropriations lapse at the end of the fiscal year. Appropriations for capital projects
carried over or encumbered are re- appropriated and carried over in the following year’s budget.
F. 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 1,920 hours of sick leave). If sick leave and vacation are not used by the employee 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.
G. Cash and Cash Equivalents
For the purpose of the statements of cash flows for all proprietary fund types ( enterprise and internal
service funds), the City considers cash equivalents to be all highly liquid investments with a maturity of
three months or less when purchased.
H. Inventories
Inventories are stated at moving average cost. The cost is recorded as an expenditure at the time an
individual inventory item is consumed. As inventories must be maintained at a certain level, a reserve for
inventories is set aside in the general fund balances. Consequently, these reserved funds are not available
for appropriation.
General fund inventories consist of stationery, janitorial supplies, electrical supplies, switches, building
maintenance supplies, fertilizers, seeds, and small tools.
Water fund inventory consists of water meters, water pipes, valves and fittings, and small tools.
Equipment services fund inventory consists of tires, batteries, testing equipment, automotive parts, and
small tools.
I. 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%.
31
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED)
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.
J. 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, 2004. There is no accrual for unbilled water services as of June 30, 2004; 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.
K. 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 below to capital assets.
Buildings 20- 50 Years
Improvements 33- 60 Years
Equipment 2- 15 Years
Streets 20 Years
Parks 25 Years
Bridges 30 Years
Traffic Signals 20 Years
Storm Drains 40 Years
32
NOTE 2 - LOANS RECEIVABLE
As of June 30, 2004, loans receivable consist of the following:
Wyndham Place First Time Homebuyer Loan Program $ 743,085
City Centre Plaza Loans 1,692,383
First Time Homebuyer Silent Loan Program 1,771,600
Loans with Non- profits and For Profit Organizations 1,150,000
Housing Rehabilitation Loans 2,541,797
City Attorney Housing Assistance Loan 235,192
Shores Childcare Loan 3,013,378
Parking Fund Loan 1,300,000
Total $ 12,447,435
A. First Time Homebuyer Loan Program
The City established a First Time Homebuyer Program during fiscal year 1995 on a specific development
sponsored by the Redevelopment Agency called Wyndham Place. The program currently involves the
resale of Wyndham units where the City has First Right of Refusal. The City or Agency exercises its First
Right of Refusal and markets to solicit qualified buyers.
A portion of the City and Agency’s Shared Appreciation is used to assist the new buyer in the Resale
Program. While the initial program in 1995 made 0% interest loans, current buyers in the Resale Program
are assisted according to the needs of the Borrower. Depending on the Borrower’s ability to secure private
financing for a first mortgage, the City and Agency loan is underwritten based on the Borrower’s
spendable income.
These loans bear no interest and are secured by Second deeds of trust on the property, and typically, no
payments are due until five years after the date of purchase. As of June 30, 2004 the Redevelopment
Agency has outstanding loans of $ 302,369 to 13 Wyndham Place buyers, while the City has loaned
$ 440,716 from the HOME Investment Partnership Block Grant, Community Development Block Grant
( CDBG), and Rental Rehabilitation Program ( RRP) funds to eight Wyndham Place homebuyers. Since
these loans are not currently available for expenditure, fund balance has been reserved in this amount.
B. City Centre Plaza Loans
The Redevelopment Agency sold several parcels of land to the developers of the City Centre Plaza project
( a residential and commercial development) for $ 1,700,000 in 1996. The developers constructed City
Center Plaza, which contains 81 affordable housing units, a childcare facility, residential and commercial
parking, and 17,900 square feet of retail space. The promissory note from Mezes Court Associate in the
amount of $ 1,445,000 is to be repaid through 2028 from surplus revenues generated by the housing
project and accrued interest at 3%. The promissory note from J. H. R. Trust in the amount of $ 255,000 is
also due to begin making payments beginning in 2011 and continuing until 2028 and accrues interest at
3% as well. The outstanding balance at June 30, 2004 was $ 1,692,383.
C. First Time Homebuyer Silent Loan Program
In 2000, the Redevelopment Agency established a First Time Homebuyer Silent Loan Program. Loans
are deferred for the first five years, and then amortized at 4% interest over the remaining 25 years. An
Equity Participation requirement shares appreciation based on the amount of the Redevelopment
Agency’s original loan amount. At June 30, 2004 the Redevelopment Agency loaned $ 2,171,600 to 22
homebuyers. The outstanding balance at June 30, 2004 was $ 1,771,600. Since these loans are not
currently available for expenditure, fund balance has been reserved in this amount.
33
NOTE 2 - LOANS RECEIVABLE ( CONTINUED)
D. Loans with Non- profits and For Profit Organizations
The City and Redevelopment Agency have loaned $ 500,000 to MP Redwood Court Associates and
$ 650,000 to Hallmark Apartments LLP.
E. Housing Rehabilitation Loans
The City and Redevelopment Agency have outstanding loans for housing rehabilitation in the amount of
$ 2,541,797.
F. City Attorney Housing Assistance Loan
In 2003/ 04 the City made a housing assistance loan to the City Attorney. The outstanding loan balance at
June 30, 2004 was $ 235,192. Additional details of this loan agreement are outlined in Note 18.
G. Shores Childcare Loan
The City entered into an agreement with Shores Childcare, LLC whereby $ 3,200,000 was loaned to
Shores Childcare, LLC for construction of a childcare facility on city- owned land in the Redwood Shores
area. The term of the loan is 20 years maturing January 2023, with interest payable quarterly and
calculated based on the quarterly rate of the State of California Local Agency Investment Fund. The
outstanding balance of the loan at June 30, 2004 was $ 3,013,378.
H. Parking Fund Loan
The capital outlay fund has a loan receivable in the amount of $ 1,300,000 from the parking fund.
Additional details of this loan agreement are outlined in Note 7.
NOTE 3 – CASH AND INVESTMENTS
A. Investment Policy
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.
Authorized investments per the City’s investment policy and state government code are:
Certificates of Deposit State of California Local Agency Government Agency Securities
Bankers Acceptances Investment Fund ( LAIF) Treasury Bills and Notes
Commercial Paper County of San Mateo Investment Pool Passbook Savings Accounts
Money Market Funds Money Market Certificates Corporate Notes
34
NOTE 3 – CASH AND INVESTMENTS ( CONTINUED)
B. Collateral and Categorization Requirements
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).
The carrying amount of the City’s cash and deposits was ($ 282,587) and $ 1,220,589 at June 30, 2004 and
2003, respectively. Bank balances before reconciling items were $ 2,425,759 at June 30, 2004. Of the
total bank balances, $ 224,854 was insured or held by the City or its agent in the City's name ( Category 1)
and $ 2,200,905 was collateralized ( Category 2).
Three categories of risk level have been developed by the Governmental Accounting Standards Board
Statement No. 3 to disclose the risks associated with deposits and investments of public money:
Deposits: Category 1 - insured or collateralized with securities held by the entity or by its agent
in the entity’s name;
Category 2 - collateralized with securities held by the pledging financial institution’s
trust department or agent in the entity’s name;
Category 3 - uncollateralized.
Investments: Category 1 - insured or registered, or securities held by entity or its agent in the
entity’s name;
Category 2 - uninsured and unregistered, with securities held by the counterparty’s
trust department or agent in the entity’s name;
Category 3 - uninsured and unregistered, with securities held by the counterparty, or by
its trust department or agent but not in the entity’s name.
The foregoing categorizations do not address the risk of loss due to changes in fair value.
Investments in pools managed by other governments or in mutual funds are not required to be categorized
pursuant to Governmental Accounting Standards Board Statement No. 3.
35
NOTE 3 – CASH AND INVESTMENTS ( CONTINUED)
C. Categorization
Cash and investments, which are carried at fair value, consist of the following at June 30:
2004
Not Required
Category 1 Category 2 to be Categorized Total
City Treasury:
Cash and Deposits: $ $ $
Demand accounts at banks 224,655 ( 507,242) ( 282,587)
Certificates of Deposit 300,000 1,950,000 2,250,000
Employee Cafeteria Benefits
Plan deposits in bank 100,000 449,506 549,506
Cash on hand 11,985 11,985
Total cash and deposits 624,655 1,892,264 11,985 2,528,904
Investments:
U. S. Agency Issues 47,452,370 47,452,370
Corporate Bonds 10,468,105 10,468,105
County of San Mateo Investment Pool 51,551,907 51,551,907
California Local Agency Investment Fund 21,507,807 21,507,807
Total investments 57,920,475 73,059,714 130,980,189
Total City Treasury 58,545,130 1,892,264 73,071,699 133,509,093
Cash with Fiscal Agent: 50,698,638 50,698,638
Total Cash and Investments 58,545,130 1,892,264 123,770,337 184,207,731
The composition of cash and investments as of June 30, 2004 by fund is as follows:
Available
for
Operations Restricted Total
$ $ $
General Fund 37,614,194 37,614,194
Special Revenue Funds 47,517,535 47,517,535
Capital Projects Funds 20,238,982 19,849,247 40,088,229
Debt Service Funds 7,396,751 7,396,751
Enterprise Funds 23,637,138 1,803,499 25,440,637
Internal Service Funds 13,336,868 13,336,868
Fiduciary Funds 12,813,517 12,813,517
Total 142,344,717 41,863,014 184,207,731
Cash and investments were scheduled to mature as follows at June 30, 2004:
Available immediately $ 71,840,586
Maturities of three years or less 59,139,603
Total $ 130,980,189
36
NOTE 3 – CASH AND INVESTMENTS ( CONTINUED)
D. Funds Held by Fiscal Agents
The City had $ 50,698,638 in cash and investments as of June 30, 2004 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
provisions governing the issuance of bonds, certificates, or leases, may be invested in accordance with the
ordinance, resolutions, or indentures specifying the types of investments its trustees or fiscal agents may
make. In some situations, these investments differ from those permitted by the City investment policy.
Included in these investments at June 30, 2004 is a guaranteed investment contract maturing in fiscal year
2012 authorized in the bond indenture and by City Council prior to purchase.
E. Marking Investments to Fair Value ( GASB 31)
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, 2004 from the fiscal year ended June 30, 2003 amounted to an unrealized
decrease of $ 3,756,763.
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.
F. State and County Investment Pools
The City is a voluntary participant in the Local Agency Investment Fund ( LAIF) that is regulated by
California Government Code Section 16429 under the oversight of the Treasurer of the State of
California. The City reports its investment in LAIF at the fair value amount provided by LAIF. The
balance available for withdrawal is based on the accounting records maintained by LAIF, which are
recorded on an amortized cost basis. Included in LAIF’s investment portfolio are collateralized mortgage
obligation, mortgage- backed securities, other asset- backed securities, loans to certain state funds, and
floating rate securities issued by federal agencies, government- sponsored enterprises, and corporations.
37
NOTE 4 – CAPITAL ASSETS
A. Summary
Capital assets at June 30 are comprised of the following:
Beginning
Balance Ending
as Restated Additions Retirements Transfers Balance
$ $ $ $ $
Governmental Activities
Capital assets not being depreciated:
Land 11,577,645 3,848 11,581,493
Construction in progress 33,917,068 16,581,464 ( 2,035,199) 48,463,333
Total capital assets not being depreciated 45,494,713 16,585,312 ( 2,035,199) 60,044,826
Capital assets being depreciated:
Buildings 56,024,331 56,024,331
Accumulated depreciation ( 11,339,746) ( 1,120,487) ( 12,460,233)
Parks 16,580,735 574,745 83,806 17,239,286
Accumulated depreciation ( 6,316,733) ( 693,139) ( 7,009,872)
Streets 60,303,896 60,303,896
Accumulated depreciation ( 19,948,951) ( 2,633,451) ( 22,582,402)
Bridges 2,248,335 2,248,335
Accumulated depreciation ( 1,000,660) ( 74,944) ( 1,075,604)
Traffic Signals 1,968,385 1