City of Redwood City
Redwood City, California
fiscal year ended
June 30, 2003
Comprehensive Annual
Financial Report
Building a Great
Community Together
Cover
The cover represents the various people and places
in the City of Redwood City that help to build a
great community.
City of Redwood City
Redwood City, California
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
Fiscal Year Ended June 30, 2003
Prepared by
City of Redwood City Finance Department
City of Redwood City
Redwood City, California
Comprehensive Annual Financial Report
Fiscal Year Ended June 30, 2003
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
City of Redwood City
Redwood City, California
Comprehensive Annual Financial Report
Fiscal Year Ended June 30, 2003
TABLE OF CONTENTS
_______________________________________________________________________________
II. FINANCIAL SECTION ( Continued) Exhibit Page
General Fund - Statement of Revenues, Expenditures, and Changes in
Funds Balances - Budget and Actual.......................................................................... 22
Redevelopment Agency Fund - Statement of Revenues, Expenditures,
and Changes in Funds Balances - Budget and Actual ................................................ 23
Major Proprietary Funds:
Statement of Net Assets .............................................................................................. 25
Statement of Revenues, Expenses, and Changes in Net Assets.................................. 26
Combining Statement of Cash Flows Increase ( Decrease) in Cash
and Cash Equivalents.................................................................................................. 27
Fiduciary Funds:
Statement of Fiduciary Net Assets.............................................................................. 28
Notes to Financial Statements................................................................................................. 29
D. Supplemental Information:
General Fund:
Comparative Balance Sheet .............................................................................................. 59
Comparative Statement of Revenues, Expenditures, and Changes in Fund Balances –
Budget ( GAAP Basis) and Actual .................................................................................... 60
Schedule of Revenues Compared with Budget ( GAAP Basis) and Actual ...................... 61
Schedule of Expenditures Compared with Budget ( GAAP Basis) and Actual ................ 62
Non- Major Governmental Funds:
Combining Balance Sheets ............................................................................................... 66
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ........ 70
City of Redwood City
Redwood City, California
Comprehensive Annual Financial Report
Fiscal Year Ended June 30, 2003
TABLE OF CONTENTS
_______________________________________________________________________________
II. FINANCIAL SECTION ( Continued) Exhibit Page
Budgeted Non- Major Funds:
Combining Statement of Revenues, Expenditures, and Changes in
Fund Balances - Budget and Actual ................................................................................. 74
Internal Service Funds:
Combining Statement of Net Assets ................................................................................. 83
Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets ........... 84
Combining Statement of Cash Flows Increase ( Decrease) in Cash and
Cash Equivalents............................................................................................................... 85
Agency Funds:
Combining Statement of Changes in Assets and Liabilities............................................. 87
III. STATISTICAL SECTION Table Page
General Governmental Expenditures by Function or Program -
Last Ten Fiscal Years .................................................................................................. 1 89
General Governmental Revenues by Sources - Last Ten Fiscal Years ....................... 2 90
Property Tax Levies and Collections - Last Ten Fiscal Years .................................... 3 91
State and Locally Assessed Values of Taxable Property - Last Ten Fiscal Years ...... 4 92
Property Tax Rates Direct and Overlapping Governments -
Last Ten Fiscal Years .................................................................................................. 5 93
Special Assessment Collections - Last Ten Fiscal Years ............................................ 6 94
Computation of Legal Debt Margin............................................................................. 7 95
Computation of Direct and Overlapping Debt............................................................. 8 96
Revenue Bond Coverage - Last Ten Fiscal Years ....................................................... 9 97
Construction Values - Last Ten Fiscal Years .............................................................. 10 98
Top Ten Principal Property Taxpayers........................................................................ 11 99
Demographic Statistics - Last Ten Fiscal Years.......................................................... 12 100
Miscellaneous Statistics............................................................................................... 13 101
i
1017 Middlefield Road
Redwood City, California 94063
Office of Director of Finance Telephone: ( 650) 780- 7070
and Financial Planning Fax: ( 650) 366- 2447
E- mail: mail@ redwoodcity. org
December 8, 2003
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, 2003.
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 2002 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 Management’s Discussion and Analysis
( MD& A). This letter of transmittal is designed to complement 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
ii
administrative services. Although the City maintains the sewer lines and pump stations, the sewer plant and
treatment services are provided by the South Bayside System Authority, a Joint Powers Authority of which
Redwood City is an equity holder.
This report includes all funds of Redwood City. The City Council serves in separate session as the governing
bodies of the Redwood City Redevelopment Agency, the Redwood City Facilities and Infrastructure Authority, and
the Public Financing Authority although these agencies are legal entities apart from the City. Under the City
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
“ On Broadway” Retail- Cinema Project
In January of 2003, the City of Redwood City and the Redwood City Redevelopment Agency entered into an
amended Disposition and Development Agreement ( DDA) with BHV Innisfree Ventures for the development of
the “ On Broadway” retail- cinema project. This was an update of the original DDA, which was modified to reflect
the changing economic conditions of the region.
The “ On Broadway” project creates a unique opportunity to infuse energy and excitement into the very heart of
downtown Redwood City. The project, when completed, will consist of three main components:
· An underground two- level public parking garage— owned by the City, paid for by the Redevelopment
Agency, and constructed by the developer— with a total of 590 spaces
· A street- level mix of retail shops, restaurants, and the cinema lobby
· A top- level 4,200- seat cinema, operated by Century Theatres
In the tradition of the grand movie palaces of another era, the new Century Theatres project reverses the trend of
blank- walled, massive multiplexes by adopting a unique layout and architectural expression, allowing it to be
integrated into the surrounding context of downtown Redwood City. Architecturally, the building is an attractive
blend of the old and the new, drawing inspiration from historic downtown buildings, while also creating a fresh and
new addition to the area.
In order to deal with the large site, the project architects divided the façade into multiple sections, each with its own
unique look, ensuring that the building blends into Redwood City’s historic downtown. To ensure that the project
contributes to a lively and active downtown street life, the street- level shops and restaurants are oriented to the
sidewalk, with active doors and windows along all four sides of the block.
With the completion of the “ On Broadway” retail- cinema project, there will be a lot more activity downtown,
especially dining. In order to create a grand setting for this activity, Middlefield Road will be redesigned from
Winslow to Broadway and re- named “ Theater Way.” The new street features attractive granite paving and a
European feel, and is designed to be easily closed to traffic and used for dining or community events during
weekends or special occasions. Theater Way will be a great place to eat, drink, stroll, or meet up with friends.
iii
“ On Broadway” will be located on the block bounded by Broadway, Middlefield Road, and Jefferson Avenue. The
land acquisition and tenant relocation processes are completed, the previously existing buildings have been
demolished, and excavation is currently underway for the public parking garage. The anticipated opening of this
project will be in the fall of 2005.
Courthouse Square
In September of 2003, the Board of Directors of the Redevelopment Agency approved funding for the Courthouse
Square project. This project involves the demolition of the South Annex to the Courthouse, the restoration of the
portico and façade of the original 1910 structure, and the construction of a town square in the space created by the
removal of the annex. The square, with the majestic restored Courthouse as its backdrop, will serve as a public
gathering place for daily encounters and for special ceremonies. It will be, in effect, Redwood City’s outdoor “ living
room.” Currently, staff is working with the public and the urban design firm of Freedman, Tung, and Bottomley to
design the square, and the design for the restoration of the Courthouse is already completed. The restored
courthouse and new square are scheduled to be completed in the fall of 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
· 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.
iv
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 which is having a pronounced impact on the information technology industry. From January through
June of 2003, the unemployment rate in Redwood City has occupied a fairly narrow bank of 4.6% to 4.9%. It is
our hope and expectation the local economy has “ bottomed out” and that the local economies will soon be
participating in the nascent nationwide recovery.
According to a recent report published by the San Francisco Federal Reserve Bank, the following factors should
contribute to the Bay Area remaining a focal point for innovation and technology:
· The area’s key resources – universities, research labs, and skilled work force remain intact;
· Data through the second quarter of this year show the region continues to receive a significant share of
venture funding in a wide range of fields including the emerging biotech industry;
· Several information technology companies headquartered in the Bay Area have experienced increased
revenues;
· The national investment in information technology has been increasing and is expected to continue to do
so. 1
The following proposed projects, while not approved by the City, are nonetheless good indicators of several
investors’ confidence in the future of our community:
· The Glenborough Project development submittal, currently in the conceptual planning phase, proposes a
new 1,300 unit residential community with up to 500,000 square feet of office/ commercial space on 44
acres east of Highway 101.
· Abbot Labs ( pharmaceuticals) has also recently submitted conceptual plans for a 500,000 square foot
office/ manufacturing headquarters development.
· The Westpoint Marina Project, located near the Port, could also result in a new 408- slip marina with retail,
restaurants, and marina- related commercial development/ amenities.
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, 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 $ 5.9 million. At the end of fiscal year 2002/ 03, the total investments, including cash with fiscal agents, cash at
banks, and petty cash, stood at $ 147,693,480.
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.
1 FRBSF Economic Letter, Daly and Doms, November 7, 2003
v
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. Bay Cities belongs to the California
Affiliated Risk Management Authority ( CARMA) which is an excess liability pool founded by Bay Cities and two
other local government insurance pools. CARMA provides coverage from $ 1,000,001 to $ 15,000,000. A 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.
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 Excelle nce in Financial Reporting to the City of Redwood City for its Comprehensive Annual
Financial Report ( CAFR) for the fiscal year ended June 30, 2002. This is the 16th 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, 2002. This was the 17th 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.
I would also like to thank and commend the Redwood City Council and Ed Everett, City Manager, for their interest
and support in planning and conducting the financial operations of the City in a responsible and progressive manner
in the best interests of the residents of Redwood City.
Respectfully submitted,
Brian Ponty
Brian J. Ponty
Director of Finance and Financial Planning
City of Redwood City
Redwood City, California
vi
City of Redwood City
Comprehensive Annual Financial Report
June 30, 2003
ix
CITY OF REDWOOD CITY - REDWOOD CITY, CALIFORNIA
PRINCIPAL OFFICIALS
June 30, 2003
CITY COUNCIL
Richard Claire, Mayor.................................................................................... November 2003
Jeff Ira, Vice Mayor....................................................................................... November 2005
Jim Hartnett ................................................................................................... November 2005
Diane Howard ............................................................................................... November 2005
Colleen Jordan............................................................................................... November 2003
Barbara Pierce............................................................................................... November 2003
Ira Ruskin...................................................................................................... November 2003
CITY MANAGER
Edward P. Everett
DEPARTMENT DIRECTORS
City Clerk...................................................................................................... Patricia Howe
Community Development Services.................................................................. Bruce Liedstrand
Finance and Financial Planning........................................................................ Brian Ponty
Fire Chief....................................................................................................... Carlos Bolanos ( Acting)
Human Resources.......................................................................................... Maria Rivera- Peña
Library........................................................................................................... Yvonne Chen
Parks, Recreation and Community Services.................................................... Corinne Centeno
Police Chief................................................................................................... Carlos Bolanos
Public Works Services................................................................................... Peter Ingram
CITY ATTORNEY
Stan Yamamoto
City of Redwood City
1017 Middlefield Road
Redwood City, California 94063
Telephone: ( 650) 780- 7070
Fax: ( 650) 366- 2447
E- Mail: mail@ redwoodcity. org
Web Site: www. redwoodcity. org
x
CITY OF REDWOOD CITY - REDWOOD CITY, CALIFORNIA
FINANCE DEPARTMENT STAFF
June 30, 2003
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
City Redwood City
Organization Chart
30, 2002
Architectural Review Committee Home Improvement Loan Committee
Board of Building Review Housing and Human Concerns Committee
Port Manager
Board of Port Commissioners
Library Director
Library Board
Childcare Advisory Committee Park and Recreation Commission
Civic Cultural Commission Planning Commission
Fair Oaks Community Center Advisory Board Pride and Beautification Committee
Historic Resources Advisory Committee Senior Affairs Commission
City Attorney City Clerk
Community
Development Services
Parks, Recreation and
Community Services
Finance Department Police Department
Fire Department Public Works
Services
Human Resources Assistant to the
City Manager
City Manager
Citizens'
City Council
City of Redwood City
June 30, 2003
City of Redwood City
Finance Department
June 30, 2002
Annual Budget
Annual Financial Report
Treasury Management
Risk Management
General Administration
Fixed Assets
Accounts Payable
Subdivision Accounting
General Ledger
Labor Negotiations Support
State Reports
Capital Projects
General Improvement District 1- 64
Redevelopment Agency Accounting
South Bayside System Authority
Grant Accounting
Payroll
Cost Allocation Plans
Enterprise Fund Accounting
Treasury Accounting
Utility Billing and Collections
Business Licenses
Accounts Receivable
Purchasing
Parking Revenue Collection
Electronic Data Management Services
Software Development Services
Internet Services
Administrative
Assistant
Senior
Accountant
Accountant
Financial Services
Manager
Senior
Accountant
Revenue Svcs./
Senior Accountant
Information
Technology
Manager
Director of Finance
and Financial Planning
City of Redwood City
Finance Department
June 30, 2003
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
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, 2003. We encourage readers to consider the
information presented here in conjunction with the accompanying transmittal letter and basic financial statements.
FISCAL YEAR 2002/ 03 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 $ 6.7 million in FY 2002/ 03, after an $ 18.3 million increase in the
preceding year. At June 30, 2003, net assets totaled $ 349.8 million.
· Total City revenues, including program and general revenues, were $ 119.4 million, a decrease of $ 2.2
million from the prior year, while total expenses were $ 112.7 million, an increase of $ 9.4 million from the
FY 2001/ 02.
· Net assets in governmental funds increased $ 6.1 million, while net assets in business activities increased
$ 0.6 million.
· Governmental program revenues were $ 25.2 million, a decline of $ 3.3 million from FY 2001/ 02’ s $ 28.5
million.
· Governmental program expenses increased to $ 83.8 million in FY 2002/ 03, up $ 5.0 million from the prior
year.
· Revenues from business- type activities remained unchanged at $ 29.8 million in FY 2002/ 03.
· Expenses of business- type activities increased to $ 30 million in FY 2002/ 03, a $ 5 million increase from the
prior year.
· General fund revenues of $ 64.6 million increased by $ 0.7 million from the prior year.
· General fund balance of $ 39.4 million at the fiscal year end declined by $ 1.7 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 supplemental information ( none at this time)
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 Cit y’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 activitie s 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 26 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 23 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- 23 of this report.
Proprietary funds are maintained in two ways. Enterprise funds are used to report the same functions presented as
business- type activities in the government- wide financial statements. The City uses enterprise funds to account for
water, sewer, parking, and Port operations. Internal services funds are used to account for costs of the City’s
equipment services, the City’s insurance program, the costs of the City’s telephone/ communications and
information technology services, maintenance and repair of buildings, custodial services, warehousing/ supply and
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 25- 27 of this report.
Since the City’s internal service funds provide goods and services only to the City’s governmental and business-type
activities, their activities are reported only in total at the fund level. Internal service funds may not be major
funds because their revenues are derived from other City funds. These revenues are eliminated in the City- wide
financial statements and any related profits or losses are returned to the activities which created them, along with
any residual net assets of the internal service funds.
Comparisons of budget and actual financial information are presented only for the general fund and other major
funds that are special revenue funds.
Fiduciary Funds
The City maintains fiduciary funds that account for tax free employee and employer contributions made under the
provisions of section 125 of the Internal Revenue Code ( cafeteria benefits fund), for employer contributions to a
retiree medical insurance fund, and for transactions involving the Seaport Consolidated Assessment District, the
Pacific Shores Community Facilities District, and the Shores Transportation Improvement District. The City’s
fiduciary activities are reported in the separate Statements of Fiduciary Net Assets and the Agency Funds Statement
of Changes in Assets and Liabilities. The accounting used for fiduciary funds is much like that used for proprietary
funds. These activities are excluded from the City’s other financial statements because the City cannot use these
assets to finance its own operations.
The fiduciary fund financial statement may be found on page 28 of this report.
MANAGEMENT’S DISCUSSION AND ANALYSIS
6
Notes to the Financial Statements
Notes to the Financial Statements provide additional information that is essential to a full understanding of the data
provided in the government- wide and fund financial statements.
The Notes to the Financial Statements may be found on pages 29- 57 of this report.
Combining and Individual Fund Statements and Schedules
Combining and individual fund statements and schedules referred to earlier provide information for non- major
governmental funds, non- major enterprise funds, internal service funds, and fiduciary funds.
Combining and individual fund statements and schedules may be found on pages 58- 87 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 $ 349 million at June 30, 2003.
City’s Net Assets ( in Millions)
Governmental Business- type
Activities Activities Total
2003 2002 2003 2002 2003 2002 Variance
$ $ $ $ $ $
Cash and investments 123.862 136.024 23.830 30.961 147.692 166.985 - 11.554%
Other assets 29.811 23.998 32.556 25.829 62.367 49.827 25.167%
Capital assets 153.116 145.689 77.660 76.533 230.776 222.222 3.849%
Total assets 306.789 305.711 134.046 133.323 440.835 439.034 0.410%
Long- term debt outstanding 53.521 57.348 13.082 13.231 66.603 70.579 - 5.633%
Other liabilities 21.575 22.815 2.868 2.577 24.443 25.392 - 3.737%
Total liabilities 75.096 80.163 15.950 15.808 91.046 95.971 - 5.132%
Net assets:
Invested in capital assets,
net of debt 136.507 127.199 65.987 66.515 202.494 193.714 4.532%
Restricted 57.991 58.751 1.882 1.221 59.873 59.972 - 0.165%
Unrestricted
Other unrestricted net assets 37.195 39.598 50.227 49.779 87.422 89.377 - 2.187%
Total net assets 231.693 225.548 118.096 117.515 349.789 343.063 1.961%
The largest portion ( 49%) of the City’s net assets reflects its capital assets ( e. g., land, buildings, machinery, and
equipment) less any related debt used to acquire those assets that is still outstanding. The City uses these capital
assets to provide services to residents; accordingly, these assets are not available for future spending. Although the
City’s investment in capital assets is reported net of related debt, it should be noted that the resources needed to
repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate
these liabilities.
An additional portion of the City’s net assets ( 18%) represents resources that are subject to external restrictions on
how they may be used. The remaining balance of unrestricted net assets ($ 79.112 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.
MANAGEMENT’S DISCUSSION AND ANALYSIS
7
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 $ 6.7 million during the current fiscal year.
GOVERNMENTAL ACTIVITIES
Governmental activities increased the City’s net assets by $ 6.1 million, thereby accounting for 91% 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
2003 2002 2003 2002 2003 2002 Variance
Revenues $ $ $ $ $ $
Program revenues:
Community development 3.953 4.547 3.953 4.547 - 13.064%
Human Services 0.382 0.372 0.382 0.372 2.688%
Public safety 5.698 6.636 5.698 6.636 - 14.135%
Transportation 7.116 7.447 7.116 7.447 - 4.445%
Environmental support and protection 2.262 3.684 2.262 3.684 - 38.599%
Leisure, cultural and information services 5.141 5.018 5.141 5.018 2.451%
Policy development and implementation 0.599 0.755 0.599 0.755 - 20.662%
Water 13.870 13.984 13.870 13.984 - 0.815%
Sewer 9.391 9.227 9.391 9.227 1.777%
Parking 0.457 0.470 0.457 0.470 - 2.766%
Port of Redwood City 4.862 4.500 4.862 4.500 8.044%
General revenues:
Taxes/ special assessments 58.951 57.008 0.026 0.032 58.977 57.040 3.396%
Investment earnings 4.200 4.921 0.921 1.151 5.121 6.072 - 15.662%
Other 1.303 1.362 0.276 0.521 1.579 1.883 - 16.144%
Total revenues 89.605 91.750 29.803 29.885 119.408 121.635 - 1.831%
Expenses
Community development 12.943 9.744 12.943 9.744 32.830%
Human services 1.336 1.291 1.336 1.291 3.486%
Public safety 32.508 29.400 32.508 29.400 10.571%
Transportation 9.981 10.969 9.981 10.969 - 9.007%
Environmental support and protection 1.851 2.322 1.851 2.322 - 20.284%
Leisure, cultural and information services 18.899 17.090 18.899 17.090 10.585%
Policy development and implementation 2.741 4.777 2.741 4.777 - 42.621%
Interest on long term debt 2.381 2.177 2.381 2.177 9.371%
Water 15.617 12.959 15.617 12.959 20.511%
Sewer 11.088 9.444 11.088 9.444 17.408%
Parking 0.534 0.557 0.534 0.557 - 4.129%
Port of Redwood City 2.803 2.564 2.803 2.564 9.321%
Total expenses 82.640 77.770 30.042 25.524 112.682 103.294 9.089%
Change in net assets before transfers 6.965 13.980 ( 0.239) 4.361 6.726 18.341 - 63.328%
T ransfers ( 0.820) ( 0.389) 0.820 0.389
Change in net assets 6.145 13.591 0.581 4.750 6.726 18.341 - 63.328%
Net assets - July 1 225.548 211.957 117.515 112.765 343.063 324.722 5.648%
Net assets - June 30 231.693 225.548 118.096 117.515 349.789 343.063 1.961%
MANAGEMENT’S DISCUSSION AND ANALYSIS
8
Key elements of the increase/ decrease in revenues for governmental activities are as follows:
General governmental revenues declined about 2.3%, or $ 2.14 million from FY 2001/ 02 due primarily to the slow
regional economy which affected tax revenues and fees for services.
Community development revenues were lower in FY 2002/ 03 due to a decline in development- related revenue.
Environmental support and protection revenues and transportation revenues declined primarily as a result of
facilities fees in General Improvement District 1- 64 falling to zero as there were no building permits for new
building issued in this area in FY 2002/ 03.
Key elements of the increase/ decrease in expenses for governmental activities are as follows:
Total expenses were up 6.3%, or $ 4.9 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 the Redevelopment Agency’s administrative expenses were included in
the City’s general fund for the first time in FY 2002/ 03. The Redevelopment Agency then reimbursed the City for
these expenses. This reimbursement was netted against “ policy development and implementation” expenses which
explains the 42% decline in these expenses when compared to the preceding year.
BUSINESS- TYPE ACTIVITIES
Business- type activities increased the City’s net assets by $ 500,000 in FY 2002/ 03, or about 9% 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 slightly lower in FY 2002/ 03 than the previous year as the increase in commercial
office vacancies in Redwood City resulted in lower water sales.
The water utility’s expenses were significantly higher (+ 20.5%) in FY 2002/ 03 due to several factors: almost $ 1
million of expenses were due to services to support projects being undertaken by the water utility; staffing
vacancies that occurred in FY 2001/ 02 that were filled in FY 2002/ 03; and higher professional services in FY
2002/ 03.
The sewer utility experienced a 17% increase in operating expenses mainly due to an increase in projects initiated
this past year.
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, 2003, the City’s governmental funds reported combined fund balances of $ 121.2 million, which is a
decrease of $ 3 million from the beginning year balance of $ 124.2 million. This decline was primarily due to an
increase in capital outlay expenditures in the Redevelopment Agency in connection with downtown revitalization
efforts.
Governmental fund revenues increased $ 0.5 million this year to a new total of $ 89.5 million. The capital outlay
fund accounted for most of this increase, with the general fund accounting for the remainder. Expenditures,
MANAGEMENT’S DISCUSSION AND ANALYSIS
9
including capital outlay, decreased $ 5.8 million this year to a new total of $ 92.7 million. Most of the decrease was
attributable to a reduction in capital outlay expenditures as the Pacific Shores Community Facilities District
completed most of its projects in FY 2001/ 02.
The general fund is the chief operating fund of the City. At June 30, 2003, unreserved fund balance of the general
fund was $ 34.7 million of which $ 16.9 million is available for subsequent years’ expenditures while total fund
balance reached $ 39.4 million. As a measure of the general fund’s liquidity, it may be useful to compare both
unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents
59% of total fund expenditures, while total fund balance represents 66% of that same amount. The fund balance of
the City’s general fund decreased by $ 1.7 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 $ 0.7 million this fiscal year due to increases in
property taxes and sales and other taxes. Property taxes increased $ 0.31 million as assessed valuations rose 7.3%,
reflecting continued development in the City, increased prices for existing residential properties, and large
payments due to prior year’s supplemental taxes.
General fund expenditures increased $ 5.4 million due to several factors: reporting Redevelopment Agency
administrative expenditures in the general fund for which the Redevelopment Agency reimburses the general fund -
$ 1.9 million, and increased public safety expenditures as a result of higher salaries and benefits - $ 3.5 million.
Even so, expenditures were less than budgeted and represented an increase of 9.98% in FY 2002/ 03, to a total of
$ 59.5 million.
Transfers out of the general fund decreased $ 12 million in FY 2002/ 03 as a result of transferring amounts that have
accumulated in fund balance from prior years in FY 2001/ 02 to fund capital projects.
Capital Outlay Fund - This fund accounts for resources provided to finance general governmental capital projects.
In FY 2002/ 03, the capital outlay fund generated $ 2.9 million in revenue, most of which was from contributions
from developers. This fund was also the recipient of $ 5.7 million of transfers from the general fund. Total outlays
were $ 8.3 million of which $ 4.7 million met with City’s criteria for capitalization. The balance ($ 2.6 million) was
expended in FY 2002/ 03. Total outlays in the prior year ( FY 2001/ 02) were $ 8.6 million. Most of the capital
outlay fund’s $ 23.8 million fund balance is designated for specific capital projects ($ 19.9 million).
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 declined by $ 1.9 million primarily due to capital project
expenditures devoted to the downtown revitalization efforts that began this past year.
Proprietary Funds
One- Time Only Projects - Enterprise fund net assets totaled $ 118.1 million at the end of the fiscal year, an increase
of $ 0.6 million over the prior year. Enterprise operating revenues were $ 28.6 million this year, an increase of $ 0.9
million from last year, while net non- operating revenues were $ 1.2 million compared to $ 2.0 million the prior year.
Enterprise fund operating expenses were $ 28.6 million this year, up $ 4.1 million from the prior year, most of which
was due to higher operating expenses in the water and sewer funds.
Water Utility - Net assets of the water utility fund decreased $ 0.5 million in the current year to a total of $ 46.5
million.
Sewer Utility - The sewer utility fund incurred an operating loss of $ 1.2 million in the current year, up from the
operating loss of $ 43,000 in the prior year. Revenues increased by $ 342,000 while expenses increased over $ 1.5
MANAGEMENT’S DISCUSSION AND ANALYSIS
10
million over the prior year. Non- operating revenues declined by $ 0.9 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 $ 12,000 this year to $ 457,000, while operating expenses
decreased to $ 467,000, a decrease of $ 18,000. Net non- operating revenues ( expenses) improved from $ 23,400 in
FY 2001/ 02 to $ 28,600 in FY 2002/ 03 primarily as a result of a drop in interest expense attributable to a variable
rate loan.
Port Fund - Operating revenues were up 13.9% while operating expenses were up 9.5% from FY 2001/ 02. Non-operating
revenues were up 48% primarily due to a large legal settlement received in FY 2002/ 03 in connection
with the liquid bulk terminal toxic contamination clean- up. Overall, net assets increased from $ 25.9 million to
$ 28.6 million, 10%.
GENERAL FUND BUDGETARY HIGHLIGHTS
On April 28, 2003, the City Council approved over $ 1.3 million of FY 2002/ 03 general fund appropriation
reductions due to unanticipated declines in FY 2002/ 03 revenue projections. These reductions represented about
2% of the adopted FY 2002/ 03 expenditure budget. At the same meeting, the council also adopted approximately
$ 460,000 in general fund appropriation increases which were primarily the result of receiving grants that were not
expected when the original budget was adopted.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets - At the end of FY 2002/ 03, the City had $ 230 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
2003 2002 2003 2002 2003 2002 Variance
$ $ $ $ $ $
Land 11.577 11.577 3.448 3.448 15.025 15.025 0.000%
Streets 60.304 57.638 60.304 57.638 4.625%
Construction in progress 33.917 29.051 18.343 16.187 52.260 45.238 15.522%
Buildings 56.024 56.024 9.333 9.329 65.357 65.353 0.006%
Equipment 16.030 14.437 2.264 2.247 18.294 16.684 9.650%
Improvements 77.190 76.451 77.190 76.451 0.967%
Harbor improvements 3.292 3.141 3.292 3.141 4.807%
Parks, bridges, etc. 18.829 15.809 18.829 15.809 19.103%
Traffic signals 1.968 1.968 1.968 1.968 0.000%
Storm drains 2.914 2.436 2.914 2.436 19.622%
Less accumulated depreciation ( 48.447) ( 43.251) ( 36.210) ( 34.270) ( 84.657) ( 77.521) 9.205%
Total capital assets 153.116 145.689 77.660 76.533 230.776 222.222 3.849%
Governmental Activities
The substantial ( 17%) 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 major
park improvements including installation of synthetic turf playfields and the creation of a skateboard park. Storm
Drains capital assets increased due to levee improvements constructed in Redwood Shores.
MANAGEMENT’S DISCUSSION AND ANALYSIS
11
Business- Type Activities
The $ 2.2 million increase in Construction in Progress resulted primarily from the environmental remediation of the
liquid bulk terminal facility at the Port.
Long- Term Debt - Issues described in detail in Notes 5 and 6 to Financial Statements. No debt was issued
in FY 2002/ 03.
Outstanding Debt ( in Millions)
Governmental Business- Type
Activities Activities Total
2003 2002 2003 2002 2003 2002 Variance
$ $ $ $ $ $
Revenue bonds 27.915 29.725 10.415 10.600 38.330 40.325 - 4.947%
General improvement bonds 7.175 8.655 7.175 8.655 - 17.100%
Tax increment bonds 11.010 11.980 11.010 11.980 - 8.097%
Loans 0.423 0.465 2.018 2.039 2.441 2.504 - 2.516%
Accrued sick leave and vacation 6.998 6.523 0.649 0.592 7.647 7.115 7.477%
Total long term debt 53.521 57.348 13.082 13.231 66.603 70.579 - 5.633%
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, 2003, a total of $ 32.6 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.
Redwood City's unemployment rate as of June 30, 2003 was 4.9% compared to a statewide rate of 6.7%. These
changes over the prior year’s unemployment rates of 4.1% and 5.2%, respectively, reflect the economic downturn
being experienced in California and in this area in particular.
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. Sales tax revenues have increased 1.35% from $ 14.9 million to $ 15.1 million, transient
occupancy taxes have increased 3.7% from $ 1.49 million to $ 1.55 million while development related revenues have
declined 25% from $ 1.6M in FY 2001/ 02 to $ 1.2 million in FY 2002/ 03.
According to information published by BT Commercial Real Estate, the vacancy rate for commercial office space
in San Mateo County was 28.5% as of September 30, 2003. This is the highest vacancy rate since at least 1990. By
comparison, in 1999 the vacancy rate for commercial office space was 1.2%. Redwood City currently had over 2.3
million square feet of vacant office space out of a total inventory of 9.6 million square feet as of September 30.
Despite the current economic malaise, City 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
MANAGEMENT’S DISCUSSION AND ANALYSIS
12
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, 2003
Governmental Business- Type
Activities Activities Total
$ $ $
ASSETS
Cash and investments available for operations 116,498,543 21,708,773 138,207,316
Cash and investments, restricted 7,364,958 2,121,206 9,486,164
Receivables ( net of allowance for uncollectibles):
Taxes and assessments - current 4,092,597 4,092,597
Accounts 1,733,228 3,490,519 5,223,747
Loans 11,273,597 11,273,597
Accrued interest 1,510,614 1,510,614
Due from other governmental agencies 3,005,072 3,005,072
Inventory of supplies at cost 600,101 171,380 771,481
Internal balances ( 6,000,000) 6,000,000
Deposits 6,610,152 6,610,152
Prepaid expenses 224,527 224,527
Investment in land held for redevelopment 6,984,304 6,984,304
Capital assets:
Nondepreciable 45,494,713 21,790,304 67,285,017
Depreciable buildings, property, equipment and infrastructure, net 107,621,792 55,869,663 163,491,455
Unamortized bond discounts & issuance costs 545,042 545,042
Investment in sewer authority 20,358,246 20,358,246
Investment in sewage capacity rights 1,766,708 1,766,708
Total assets 306,789,671 134,046,368 440,836,039
LIABILITIES
Accounts payable 6,114,615 2,445,830 8,560,445
Accrued interest payable 659,226 74,044 733,270
Accrued payroll 2,646,480 2,646,480
Deposits payable 4,373,181 158,180 4,531,361
Insurance claims payable 7,010,972 7,010,972
Deferred revenue 770,210 189,251 959,461
Accrued sick leave and vacation 6,998,538 649,186 7,647,724
Long- Term Debt:
Due in one year 4,497,321 211,274 4,708,595
Due in more than one year 42,025,889 12,222,373 54,248,262
Total liabilities 75,096,432 15,950,138 91,046,570
NET ASSETS
Invested in capital assets, net of related debt 136,506,505 65,986,113 202,492,618
Restricted for:
Capital projects 29,066,018 720,846 29,786,864
Debt service 7,178,289 1,161,601 8,339,890
Community development projects 19,924,622 19,924,622
Other purposes 1,822,881 1,822,881
Total restricted net assets 57,991,810 1,882,447 59,874,257
Unrestricted net assets 37,194,924 50,227,670 87,422,594
Total unrestricted net assets 37,194,924 50,227,670 87,422,594
Total net assets 231,693,239 118,096,230 349,789,469
See accompanying notes to financial statements
14
CITY OF REDWOOD CITY, CALIFORNIA
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2003
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 12,831,134 112,120 2,364,991 1,229,314 359,082 ( 8,989,867) ($ 8,989,867)
Human services 1,336,922 382,400 ( 954,522) ( 954,522)
Public safety 32,507,665 1,816,376 1,572,132 2,309,818 ( 26,809,339) ( 26,809,339)
Transportation 9,980,803 79,102 1,515,937 5,521,096 ( 2,864,668) ( 2,864,668)
Environmental support and protection 1,817,415 33,704 1,208,257 1,053,969 411,107 411,107
Leisure, cultural and information services 18,899,190 2,463,754 1,704,521 972,728 ( 13,758,187) ( 13,758,187)
Policy development and implementation 4,001,736 ( 1,259,494) 574,211 442 25,032 ( 2,142,557) ( 2,142,557)
Interest on long term debt 2,380,718 ( 2,380,718) ( 2,380,718)
Total Governmental Activities 83,755,583 ( 1,113,670) 8,506,691 6,404,746 10,241,725 ( 57,488,751) ( 57,488,751)
Business- Type Activities:
Water Utility Fund 15,002,480 616,079 13,869,575 ( 1,748,984) ( 1,748,984)
Sewer Utility Fund 10,630,598 456,581 9,362,230 29,327 ( 1,695,622) ( 1,695,622)
Parking Fund 493,019 41,010 457,535 ( 76,494) ( 76,494)
Port of Redwood City 2,802,709 4,834,807 27,373 2,059,471 2,059,471
Total Business- Type Activities 28,928,806 1,113,670 28,524,147 56,700 ( 1,461,629) ( 1,461,629)
Total 112,684,389 37,030,838 6,404,746 10,298,425 ( 57,488,751) ( 1,461,629) ( 58,950,380)
General revenues:
Taxes:
Property taxes 26,652,871 25,982 26,678,853
Sales taxes 15,090,100 15,090,100
Other taxes 17,208,304 17,208,304
Investment Earnings 4,200,041 920,694 5,120,735
Increase ( decrease) in investment in sewer authority ( 143,159) ( 143,159)
Intergovernmental 45,181 45,181
Other 1,408,587 439,860 1,848,447
Loss on disposal of capital assets ( 151,300) ( 20,704) ( 172,004)
Transfers ( 820,187) 820,187
Total general revenues and transfers 63,633,597 2,042,860 65,676,457
Change in Net Assets 6,144,846 581,231 6,726,077
Net Assets- Beginning, as restated 225,548,393 117,514,999 343,063,392
Net assets- Ending 231,693,239 118,096,230 349,789,469
See accompanying notes to financial statements
15
16
City of Redwood City
Comprehensive Annual Financial Report
June 30, 2003
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 2003.
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, 2003
Capital Redevelopment Other Total
General Outlay Agency Governmental Governmental
Fund Fund Fund Funds Funds
$ $ $ $ $
ASSETS
Cash and investments available for operations 39,226,106 8,468,912 24,914,040 29,762,496 102,371,554
Cash and investments, restricted 7,364,958 7,364,958
Receivables ( net of allowance for uncollectibles):
Taxes and assessments - current 3,868,722 223,875 4,092,597
Accounts 1,545,033 63,726 28,983 1,637,742
Loans 3,185,175 1,300,000 1,257,778 5,530,644 11,273,597
Accrued interest 842,762 239,346 66,061 187,275 1,335,444
Due from other governmental agencies 1,395,519 48,386 1,560,395 3,004,300
Due from other funds 14,000,000 6,000,000 20,000,000
Inventory of supplies at cost 348,135 348,135
Advances to other funds 375,167 375,167
Deposits 6,232,652 377,500 6,610,152
Investment in land held for redevelopment 1,733,724 2,600,000 2,650,580 6,984,304
Total Assets 50,786,619 32,086,746 28,837,879 53,686,706 165,397,950
LIABILITIES
Accounts payable 2,034,290 271,242 1,786,057 1,634,858 5,726,447
Accrued payroll 2,646,480 2,646,480
Deposits payable 4,268,034 27,500 20,246 57,401 4,373,181
Due to other funds 8,000,000 20,000,000 28,000,000
Deferred revenue 770,210 200,831 971,041
Deferred loan revenue 11,643 446,572 458,215
Advances from other funds 375,167 375,167
Accrued sick leave and vacation - current 1,688,857 1,688,857
Total Liabilities 11,407,871 8,298,742 21,817,946 2,714,829 44,239,388
FUND BALANCES
Reserved for:
Encumbrances 550,698 675,588 780,621 1,322,375 3,329,282
Loans 3,185,175 1,300,000 1,246,135 5,084,072 10,815,382
Land held for redevelopment 1,733,724 2,600,000 2,650,580 6,984,304
Low income housing 2,587,746 2,587,746
Inventory 348,135 348,135
Advances to other funds 375,167 375,167
Debt service 7,005,122 7,005,122
General reserve 250,000 250,000
Unreserved, reported in:
General fund 34,669,573 34,669,573
Special revenue funds 2,393,177 16,249,107 18,642,284
Debt service funds 153,122 153,122
Capital projects funds 20,078,692 15,919,753 35,998,445
TOTAL FUND BALANCES 39,378,748 23,788,004 7,019,933 50,971,877 121,158,562
Total Liabilities and Fund Balances 50,786,619 32,086,746 28,837,879 53,686,706 165,397,950
See accompanying notes to financial statements
18
CITY OF REDWOOD CITY, CALIFORNIA
RECONCILIATION OF THE
GOVERNMENTAL FUNDS - BALANCE SHEET
WITH THE STATEMENT OF ACTIVITIES
JUNE 30, 2003
$
TOTAL FUND BALANCES -- TOTAL GOVERNMENTAL FUNDS 121,158,562
Amounts reported for Governmental Activities in the Statement of
Net Assets are different from those reported in the Governmental Funds above because of the following:
CAPITAL ASSETS
Capital assets used in Governmental Activities are not current assets or financial resources and therefore are not 153,116,505
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 activities,
such as insurance and central services and maintenance, to individual governmental funds. The net current assets of the
Internal Service Funds are therefore included in Governmental Activities in the following line items in the Statement of Net Assets.
Cash and investments 14,126,989
Accounts receivable 95,486
Due from other governmental agencies 772
Due from other funds 2,000,000
Inventory of supplies at cost 251,966
Accounts payable ( 388,168)
Accrued sick leave and vacation ( 704,483)
Claims payable ( 7,010,972)
ACCRUAL OF NON- CURRENT REVENUES AND EXPENSES
Revenues in the statement of activities that do not provide current financial resources are not reported
as revenues in the funds. 834,216
LONG TERM ASSETS AND LIABILITIES
The assets and liabilities below are not due and payable in the current period and therefore are not reported in the Funds:
Long- term debt ( 46,523,210)
Interest payable ( 659,226)
Non- current portion of accrued sick leave and vacation ( 4,605,198)
NET ASSETS OF GOVERNMENTAL ACTIVITIES 231,693,239
See accompanying notes to financial statements
19
CITY OF REDWOOD CITY, CALIFORNIA
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
FOR THE YEAR ENDED JUNE 30, 2003
Capital Redevelopment Other Total
General Outlay Agency Governmental Governmental
Fund Fund Fund Funds Funds
$ $ $ $ $
REVENUES
Property taxes/ special assessments 18,975,013 5,148,365 5,749,339 29,872,717
Sales and other taxes 26,421,521 26,421,521
Licenses and permits 870,522 870,522
Fines, forfeitures and penalties 575,393 321,976 897,369
Use of money and property 2,292,735 853,018 526,120 3,893,802 7,565,675
Net increase ( decrease) in fair value of investments 121,804 8,512 131,842 60,456 322,614
Intergovernmental 8,342,435 972,728 5,795,188 15,110,351
Developers contributions 1,056,046 13,514 1,069,560
Charges for current services 6,055,323 12,952 6,068,275
Other 914,467 358,413 1,272,880
Total Revenues 64,569,213 2,890,304 5,806,327 16,205,640 89,471,484
EXPENDITURES
Current Operations:
Community development 7,436,499 65,666 3,171,601 2,099,681 12,773,447
Human services 1,240,341 1,240,341
Public safety 30,940,039 37,736 335,858 31,313,633
Transportation 182,418 1,871,909 4,775,988 6,830,315
Environmental support and protection 233,898 256,090 1,325,660 1,815,648
Leisure, cultural and information services 16,972,656 262,327 17,234,983
Policy development and implementation 2,384,754 1,088,136 3,472,890
Capital outlay 79,987 4,663,323 3,291,180 3,290,290 11,324,780
Debt service:
Principal retirement 42,321 4,260,000 4,302,321
Interest and fiscal charges 50,494 2,387,274 2,437,768
Total Expenditures 59,470,592 8,295,681 6,505,102 18,474,751 92,746,126
EXCESS ( DEFICIENCY) OF REVENUES
OVER EXPENDITURES 5,098,621 ( 5,405,377) ( 698,775) ( 2,269,111) ( 3,274,642)
OTHER FINANCING SOURCES ( USES)
Transfers in 1,000,015 5,797,920 4,093,022 10,890,957
Transfers ( out) ( 7,781,572) ( 1,039,123) ( 1,214,863) ( 669,552) ( 10,705,110)
Total Other Financing Sources ( Uses) ( 6,781,557) 4,758,797 ( 1,214,863) 3,423,470 185,847
NET CHANGE IN FUND BALANCES ( 1,682,936) ( 646,580) ( 1,913,638) 1,154,359 ( 3,088,795)
Fund balances at beginning of period 41,061,684 24,434,584 8,933,571 49,817,518 124,247,357
FUND BALANCES AT END OF PERIOD 39,378,748 23,788,004 7,019,933 50,971,877 121,158,562
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, 2003
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 ( 3,088,795)
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. 11,324,780
Depreciation expense is deducted from the fund balance.
( Depreciation expense is net of internal service fund depreciation of
$ 750,835 which has already been allocated to serviced funds.) ( 4,793,912)
Retirements of capital assets ( 151,300)
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. 4,302,321
ACCRUAL OF NON- CURRENT ITEMS
The amounts below included in the Statement of Activities do not provide or ( require) the use of current financial resources and
therefore are not reported as revenue or expenditures in governmental funds ( net change):
Non- current portion of compensated absences 112,762
Interest payable 57,050
Deferred loan revenue ( 137,580)
Other ( 759,135)
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 ( 721,345)
CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES 6,144,846
See accompanying notes to financial statements
21
CITY OF REDWOOD CITY, CALIFORNIA
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2003
Variance with
Budgeted Amounts Final Budget
Actual Amounts Positive
Original Final Budgetary Basis ( Negative)
$ $ $ $
Fund balance, July 1 41,061,684 41,061,684 41,061,684
Resources ( inflows):
Property taxes/ special assessments 18,440,389 18,440,389 18,975,013 534,624
Sales and other taxes 29,747,144 29,747,144 26,421,521 ( 3,325,623)
Licenses and permits 820,000 820,000 870,522 50,522
Fines, forfeitures and penalties 600,000 600,000 575,393 ( 24,607)
Use of money and property 3,024,380 3,024,380 2,292,735 ( 731,645)
Net increase ( decrease) in fair value of investments 121,804 121,804
Intergovernmental 7,745,833 8,089,380 8,342,435 253,055
Charges for current services 5,546,911 5,774,711 6,055,323 280,612
Other 462,391 462,391 914,467 452,076
Amounts available for appropriation 66,387,048 66,958,395 64,569,213 ( 2,389,182)
Charges to appropriations ( outflows)
Current Operations:
Community development 6,049,778 8,783,770 7,436,499 1,347,271
Human services 1,272,573 1,256,763 1,240,341 16,422
Public safety 30,706,912 30,392,589 30,940,039 ( 547,450)
Transportation 184,445 182,125 182,418 ( 293)
Environmental support and protection 236,875 233,898 233,898
Leisure, cultural and information services 16,917,672 16,744,478 16,972,656 ( 228,178)
Policy development and implementation 5,160,250 2,252,806 2,384,754 ( 131,948)
Capital outlay 73,279 73,279 79,987 ( 6,708)
Total charges to appropriations 60,601,784 59,919,708 59,470,592 449,116
OTHER FINANCING SOURCES ( USES)
Transfers in 689,000 689,000 1,000,015 311,015
Transfers ( out) ( 8,019,991) ( 8,012,771) ( 7,781,572) 231,199
Total Other Financing Sources ( Uses) ( 7,330,991) ( 7,323,771) ( 6,781,557) 542,214
Fund balance, June 30 39,515,957 40,776,600 39,378,748 ( 1,397,852)
See accompanying notes to financial statements
22
CITY OF REDWOOD CITY, CALIFORNIA
REDEVELOPMENT AGENCY FUND
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2003
Variance with
Budgeted Amounts Final Budget
Actual Amounts Positive
Original Final Budgetary Basis ( Negative)
$ $ $ $
Fund balance, July 1 8,933,571 8,933,571 8,933,571
Resources ( inflows):
Property taxes/ special assessments 4,756,259 4,756,259 5,148,365 392,106
Use of money and property 154,182 154,182 526,120 371,938
Net increase ( decrease) in fair value of investments 131,842 131,842
Amounts available for appropriation 4,910,441 4,910,441 5,806,327 895,886
Charges to appropriations ( outflows)
Current Operations:
Community development 3,018,848 3,258,848 3,171,601 87,247
Capital outlay 3,160,669 3,946,646 3,291,180 655,466
Debt service:
Principal retirement 42,321 42,321 42,321
Total charges to appropriations 6,221,838 7,247,815 6,505,102 742,713
OTHER FINANCING SOURCES ( USES)
Transfers ( out) ( 1,220,016) ( 1,220,016) ( 1,214,863) 5,153
Total Other Financing Sources ( Uses) ( 1,220,016) ( 1,220,016) ( 1,214,863) 5,153
Fund balance, June 30 6,402,158 5,376,181 7,019,933 1,643,752
See accompanying notes to financial statements
23
24
PROPRIETARY FUND FINANCIAL STATEMENTS
Proprietary funds account for City operations financed and operated in a manner similar to a private
business enterprise. The intent of the City is that the cost of providing goods and services be financed
primarily through user charges.
The concept of major funds established by GASB Statement 34 extends to proprietary funds. The City
has identified the funds below as major proprietary funds in fiscal year 2002/ 03.
GASB 34 does not provide for the disclosure of budget vs. actual comparisons regarding proprietary
funds.
WATER UTILITY FUND
This fund is used to account for the provision of water services to the residents of Redwood City and
some residents of areas adjacent to the City. All activities necessary to provide such services are
accounted for in these funds, including, but not limited to, administration, operations, maintenance, capital
improvements, financing, and billing/ collections.
SEWER UTILITY FUND
This fund is used to account for the provision of sewer services to the residents of Redwood City and
some residents of areas adjacent to the City. All activities necessary to provide such services are
accounted for in these funds, including, but not limited to, administration, operations, maintenance, capital
improvements, financing, and billing/ collections.
PARKING FUND
This fund is used to account for on- street and off- street parking operations within the boundaries of the
central business district of the City. All activities necessary to provide metered parking within the district
are accounted for in these funds, including, but not limited to, administration, operations and maintenance,
capital improvements, meter collection, and financing including related debt service. The authority for the
formation of the district and the issuance of revenue bonds are contained in the State of California’s
Streets and Highway Code.
PORT OF REDWOOD CITY ( PORT FUND)
This fund is used to account for Port activities within the Port Department as defined in the City Charter.
These activities include, but are not limited to, administration, maintenance and operations, and Port
improvements. Management of the Port of Redwood City is provided by the Port Commission, whose
members are appointed for five- year terms by the City Council. The only limitation to the
commissioner’s authority is the power to levy taxes, which must be approved by the City Council. Also,
the City Charter provides that the City Treasurer is the Port Treasurer and the City Attorney is the Port
Attorney. This fund is included in this report because both the Bureau of Census and the State of
California require the City to include a summary of the Port’s financial transactions in the respective
reports.
CITY OF REDWOOD CITY, CALIFORNIA
PROPRIETARY FUNDS
STATEMENT OF NET ASSETS
JUNE 30, 2003
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 10,297,679 2,918,221 758,908 7,941,453 21,916,261 13,919,501
Receivables ( net of allowance for uncollectibles):
Accounts 1,113,739 1,958,886 100 417,794 3,490,519 95,486
Due from other governmental agencies 772
Due from other funds 6,000,000 6,000,000 2,000,000
Inventory of supplies at cost 171,380 171,380 251,966
Prepaid expenses 224,527 224,527
Total current assets 17,582,798 4,877,107 759,008 8,583,774 31,802,687 16,267,725
Noncurrent assets:
Cash and investments, restricted 2,121,206 2,121,206
Capital assets:
Nondepreciable 2,220,900 113,985 822,913 18,632,506 21,790,304
Depreciable buildings, property, equipment
and infrastructure, net 28,103,907 11,642,509 5,172,279 10,950,968 55,869,663 5,309,757
Unamortized bond discounts & issuance costs 545,042 545,042
Investment in sewer authority 19,958,246 400,000 20,358,246
Investment in sewage capacity rights 1,766,708 1,766,708
Total noncurrent assets 30,324,807 33,481,448 5,995,192 32,649,722 102,451,169 5,309,757
Total assets 47,907,605 38,358,555 6,754,200 41,233,496 134,253,856 21,577,482
LIABILITIES
Current liabilities:
Accounts payable 1,030,986 306,579 821 1,107,444 2,445,830 388,168
Deposits payable 56,687 10,244 91,249 158,180
Insurance claims payable 7,010,972
Accrued sick leave and vacation 369,608 200,178 11,599 67,801 649,186 704,483
Revenue bonds payable - current portion 190,000 190,000
Loans/ leases payable - current portion 21,274 21,274
Deferred Revenue 189,251 189,251
Accrued interest payable 74,044 74,044
Total current liabilities 1,457,281 506,757 22,664 1,741,063 3,727,765 8,103,623
Proprietary fund long- term debt 1,300,000 10,922,373 12,222,373
Total liabilities 1,457,281 506,757 1,322,664 12,663,436 15,950,138 8,103,623
NET ASSETS
Invested in capital assets,
net of related debt 30,324,807 11,756,494 4,695,192 19,209,620 65,986,113 5,309,757
Restricted for capital projects 720,846 720,846
Restricted for debt service 1,161,601 1,161,601
Unrestricted 16,125,517 26,095,304 736,344 7,477,993 50,435,158 8,164,102
Total net assets 46,450,324 37,851,798 5,431,536 28,570,060 118,303,718 13,473,859
Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds. ( 207,488)
Net assets of business- type activities 118,096,230
See accompanying notes to financial statements
25
CITY OF REDWOOD CITY, CALIFORNIA
PROPRIETARY FUNDS
STATEMENT OF REVENUE, EXPENSES
AND CHANGES IN FUND NET ASSETS
FOR THE YEAR ENDED JUNE 30, 2003
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 13,869,575 9,362,230 457,535 4,834,807 28,524,147 11,807,706
Total Operating Revenues 13,869,575 9,362,230 457,535 4,834,807 28,524,147 11,807,706
Operating Expenses:
Employee services 3,015,164 1,635,030 170,841 764,802 5,585,837 5,648,256
Maintenance 766,691 409,926 56,816 83,271 1,316,704 1,902,706
Water purchases 5,100,175 5,100,175
Utilities 217,744 167,938 35,715 195,509 616,906 56,016
Contractual services 367,167 5,105,398 6,549 643,624 6,122,738 682,933
Supplies and services 4,355,203 2,854,393 99,725 548,358 7,857,679 1,054,155
Depreciation and amortization 962,106 408,567 97,360 528,339 1,996,372 750,835
Insurance and claims 3,871,894
Total Operating Expenses 14,784,250 10,581,252 467,006 2,763,903 28,596,411 13,966,795
Operating Income ( Loss) ( 914,675) ( 1,219,022) ( 9,471) 2,070,904 ( 72,264) ( 2,159,089)
Nonoperating Revenues ( Expenses):
Gain ( loss) on disposal of equipment ( 20,608) ( 96) ( 20,704) ( 30,468)
Property taxes 25,982 25,982
Contributions 29,327 27,373 56,700 450,165
Interest income 625,990 155,578 25,235 90,794 897,597 627,827
Net increase ( decrease) in fair value of investments 8,855 2,343 380 11,519 23,097 15,672
Interest expense ( 63,104) ( 22,997) ( 38,806) ( 124,907)
Legal settlements 439,860 439,860
Increase ( decrease) in investment in sewer authority ( 143,159) ( 143,159)
Insurance recovery 59,424
Net Nonoperating Revenues ( Expenses) 571,741 23,481 28,600 530,644 1,154,466 1,122,620
Net Income ( Loss) Before Operating Transfers ( 342,934) ( 1,195,541) 19,129 2,601,548 1,082,202 ( 1,036,469)
Transfers in 207,632
Transfers ( out) ( 147,614) ( 145,869) ( 293,483) ( 99,996)
Net Transfers in ( out) ( 147,614) ( 145,869) ( 293,483) 107,636
Change in net assets ( 490,548) ( 1,341,410) 19,129 2,601,548 788,719 ( 928,833)
Total net assets- beginning 46,940,872 39,193,208 5,412,407 25,968,512 14,402,692
Total net assets- ending 46,450,324 37,851,798 5,431,536 28,570,060 13,473,859
Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds. ( 207,488)
Change in net assets of business- type activities 581,231
See accompanying notes to financial statements
26
CITY OF REDWOOD CITY, CALIFORNIA
PROPRIETARY FUNDS
COMBINING STATEMENT OF CASH FLOWS
INCREASE ( DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2003
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 13,897,386 8,352,520 459,210 4,836,201 27,545,317 11,824,011
Cash payments to suppliers for goods and services ( 9,417,148) ( 7,691,793) ( 156,004) ( 1,124,424) ( 18,389,369) ( 6,917,004)
Cash payments to employees for services ( 2,996,630) ( 1,625,108) ( 158,368) ( 748,664) ( 5,528,770) ( 5,600,311)
Right of way compensation ( 1,265,062) ( 898,187) ( 43,846) ( 2,207,095)
Net cash provided by operating activities 218,546 ( 1,862,568) 100,992 2,963,113 1,420,083 ( 693,304)
Cash flows from noncapital financing activities:
Advances to capital outlay fund ( 6,000,000) ( 6,000,000) ( 2,000,000)
Insurance recovery 59,424
Property taxes 25,982 25,982
Transfers out ( 99,996)
Net cash provided by noncapital financing activities ( 6,000,000) 25,982 ( 5,974,018) ( 2,040,572)
Cash flows from capital and related financing activities:
Acquisition and construction of capital assets ( 838,398) ( 72,431) ( 2,004,234) ( 2,915,063) ( 1,190,551)
Legal settlement 439,860 439,860
Principal retirements ( 205,358) ( 205,358)
Interest paid ( 63,104) ( 22,997) ( 580,216) ( 666,317)
Contributions 27,373 27,373
Unamortized issuance cost 9,682 9,682
Proceeds from sale of equipment 19,603
Net cash used for capital and related financing activities ( 901,502) ( 72,431) ( 22,997) ( 2,312,893) ( 3,309,823) ( 1,170,948)
Cash flows from investing activities:
Interest and dividends on investment 625,990 155,578 25,235 108,982 915,785 627,827
Net increase ( decrease) in fair value of investments 8,855 2,343 380 11,519 23,097 15,672
Net cash used in investing activities 634,845 157,921 25,615 120,501 938,882 643,499
Net increase ( decrease) in cash and cash equivalents ( 6,048,111) ( 1,777,078) 129,592 770,721 ( 6,924,876) ( 3,261,325)
Cash and cash equivalents at beginning of year 16,345,790 4,695,299 629,316 9,291,938 30,962,343 17,180,826
Cash and cash equivalents at end of year 10,297,679 2,918,221 758,908 10,062,659 24,037,467 13,919,501
Reconciliation of Net Cash Flow from Operating Activities
Operating income ( loss) ( 914,675) ( 1,219,022) ( 9,471) 2,070,904 ( 72,264) ( 2,159,089)
Adjustments to reconcile operating income to net cash
provided by operating activities:
Depreciation 962,106 408,567 97,360 528,339 1,996,372 750,835
Change in assets and liabilities:
Decrease ( increase) in accounts receivable 27,811 ( 1,009,710) 1,675 ( 5,021) ( 985,245) 17,077
Decrease ( increase) in due from other governmental agencies ( 772)
Decrease ( increase) in inventory/ prepaid expenses/ deposits 33,807 98,460 132,267 ( 12,810)
Increase ( decrease) in vacation & sick leave payable 18,534 9,922 11,599 16,139 56,194 47,945
Increase ( decrease) in accounts payable 123,920 ( 52,325) ( 1,045) 244,590 315,140 ( 127,672)
Increase ( decrease) in customer deposits ( 32,957) 874 3,287 ( 28,796)
Increase in deferred revenue 6,415 6,415
Increase in insurance claims payable 791,182
Total Adjustments 1,133,221 ( 643,546) 110,463 892,209 1,492,347 1,465,785
Net cash provided by operating activities 218,546 ( 1,862,568) 100,992 2,963,113 1,420,083 ( 693,304)
See accompanying notes to financial statements
Non- cash financing activity: During the fiscal year the Water Utility Fund transferred $ 147,614 and the Sewer Utility Fund transferred $ 145,869
in fixed assets, with $ 189,692 transferred to internal service funds, and $ 103,791 transferred to governmental funds.
27
CITY OF REDWOOD CITY
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET ASSETS
JUNE 30, 2003
Agency
Funds
$
ASSETS
Cash and Investments, restricted 7,452,229
Total Assets 7,452,229
LIABILITIES
Due to Bondholders 6,659,922
Employee Benefit Plans Payable 792,307
Total Liabilities 7,452,229
See accompanying notes to financial statements
28
29
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Reporting Entity
The accompanying basic financial statements present the financial activity of the City, which is the
primary government presented, along with the financial activities of its component units, which are
entities for which the City is financially accountable. Although they are separate legal entities, blended
component units are in substance part of the City’s operations and are reported as an integral part of the
City’s financial statements. This City’s component units which are described below are all blended.
The City Council serves in separate session as the governing bodies of the Redwood City Redevelopment
Agency, the Redwood City Facilities and Infrastructure Authority, and the Public Financing Authority,
although these agencies are legal entities apart from the City. Under the City Charter, the City Council
appoints the Board of Port Commissioners who oversee the operations of the Port of Redwood City,
which is considered a department of the City of Redwood City.
The Redwood City Redevelopment Agency, Redwood City Facility and Infrastructure Authority, and
Public Financing Authority are included as component units in the accompanying financial statements.
The financial activities of the foregoing entities have been aggregated and merged ( termed “ blending”)
with those of the City in the accompanying financial statements, as each meets the criteria for inclusion as
set forth in Governmental Accounting Standards Board Statement No. 14. Information concerning the
Bay Cities Joint Powers Insurance Authority and South Bayside System Authority are presented in the
notes to the financial statements, as the City’s relationship to these organizations does not meet the
aforementioned criteria for presenting these organizations as component units.
The 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, P. O. Box 391, Redwood City, CA 94064.
The Port of Redwood City was established under the City Charter as a department of the City and is
managed by the Port Commission of Redwood City, whose members are appointed by the City Council.
This commission is a semi- autonomous body and has full authority to manage the Port. Its financial
system is maintained separately from the City by the Port’s own financial staff. The Port’s Treasurer and
Legal Counsel are the City’s Finance Director and the City Attorney, respectively. The financial
transactions of the Port are incorporated as an enterprise fund.
30
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED)
B. Basis of Presentation
The City’s basic financial statements are prepared in conformity with accounting principles generally
accepted in the United States of America. The Governmental Accounting Standards Board is the
acknowledged standard setting body for establishing accounting and financial reporting standards
followed by governmental entities in the U. S. A.
The accompanying financial statements are presented on the basis set forth in Governmental Accounting
Standards Board Statements No. 34 - Basic Financial Statements and Management’s Discussion Analysis
for State and Local Governments; No. 36 - Recipient Reporting for Certain Non- exchange Revenues, an
Amendment of GASB Statement No. 33; No. 37 - Basic Financial Statements and Management’s
Discussion and Analysis for State and Local Governments; Omnibus; and No. 38 - Certain Financial
Statement Note Disclosures.
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.
31
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED)
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.
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, warehousing/ supply 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.
32
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED)
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.
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.
33
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED)
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.
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 reappropriated 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 type funds,
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.
34
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED)
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%.
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, 2003. There is no accrual for unbilled water services as of June 30, 2003; 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.
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
35
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED)
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
NOTE 2 – 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
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 $ 4,390,506 and $ 5,583,078 at June 30, 2003 and
2002, respectively. Cash on hand was $ 15,205 and bank balances before reconciling items were
$ 5,514,671 at June 30, 2003. Of the total bank balances, $ 659,972 was insured or held by the City or its
agent in the City's name ( Category 1), $ 3,514,234 was collateralized ( Category 2), and $ 216,300 was
classified as Category 3.
36
NOTE 2 – CASH AND INVESTMENTS ( CONTINUED)
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.
C. Categorization
Cash and investments, which are carried at fair value, consist of the following at June 30:
2003
Category 1 Category 2 Category 3 Total
Cash and Deposits: $ $ $ $
Demand accounts at banks 234,540 986,048 1,220,588
Certificates of Deposit 310,227 2,100,000 2,410,227
Employee Cafeteria Benefits
Plan deposits in bank 100,000 428,186 528,186
Cash with fiscal agent 216,300 216,300
Petty cash 15,205 15,205
659,972 3,514,234 216,300 4,390,506
Categorized Investments:
U. S. Treasury Notes 1,277,256 1,277,256
U. S. Agency Issues 18,878,187 18,878,187
Corporate Bonds 18,275,862 18,275,862
38,431,305 38,431,305
Non- Categorized Investments:
County of San Mateo Investment Pool 78,331,183
California Local Agency Investment Fund 25,389,626
California Arbitrage Management 151,793
Guaranteed Investment Contract 1,543,000
Money Market - U. S. Treasuries 6,908,296
112,323,898
Total Cash and Investments 39,091,277 3,514,234 216,300 155,145,709
37
NOTE 2 – CASH AND INVESTMENTS ( CONTINUED)
The composition of cash and investments as of June 30, 2003 by fund is as follows:
Available
for
Operations Restricted Total
$ $ $
General Fund 39,226,106 39,226,106
Special Revenue Funds 38,930,028 38,930,028
Capital Projects Funds 24,215,420 24,215,420
Debt Service Funds 7,364,958 7,364,958
Enterprise Funds 21,916,261 2,121,206 24,037,467
Internal Service Funds 13,919,501 13,919,501
Fiduciary Funds 7,452,229 7,452,229
Total 138,207,316 16,938,393 155,145,709
Cash and investments were scheduled to mature as follows at June 30, 2003:
Available immediately $ 105,852,881
Maturities of three years or less 47,749,828
Maturities greater than three years but less than fifteen 1,543,000
Total $ 155,145,709
D. Classification
Cash and investments are classified in the financial statements as shown below, based on whether or not
their u