City of San Mateo
San Mateo, California
Comprehensive
Annual Financial Report
For the Year Ended June 30, 2004
CITY OF SAN MATEO
SAN MATEO, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED JUNE 30, 2004
Prepared by:
FINANCE DEPARTMENT
City of San Mateo
Comprehensive Annual Financial Report
For the year ended June 30, 2004
Table of Contents
i
Page
INTRODUCTORY SECTION
Table of Contents....................................................................................................................... ........................... i
Transmittal Letter ............................................................................................................................... ................. v
Directory of City Officials ............................................................................................................................... .. xi
Map of City’s Location....................................................................................................................... ............... xii
Organization Chart ............................................................................................................................... ........... xiii
GFOA Certificate of Excellence in Financial Reporting ............................................................................... xiv
CSMFO Certificate of Excellence in Financial Reporting ............................................................................. xv
FINANCIAL SECTION
Independent Auditors’ Report......................................................................................................................... 1
Management’s Discussion and Analysis ........................................................................................................ 3
Basic Financial Statements:
Government- Wide Financial Statements:
Statement of Net Assets........................................................................................................................ 19
Statement of Activities and Changes in Net Assets ......................................................................... 20
Fund Financial Statements:
Governmental Fund Financial Statements:
Balance Sheet ............................................................................................................................... .. 26
Reconciliation of the Governmental Funds Balance Sheet
to the Government- Wide Statement of Net Assets.............................................................. 29
Statement of Revenues, Expenditures and Changes in Fund Balances .................................. 30
Reconciliation of the Governmental Statement of Revenues,
Expenditures, and Changes in Fund Balances to the Government- Wide
Statement of Activities and Changes in Net Assets ............................................................ 32
Proprietary Fund Financial Statements:
Statement of Net Assets ................................................................................................................. 34
Statement of Revenues, Expenses and Changes in Net Assets ................................................ 35
Statement of Cash Flows................................................................................................................ 36
Notes to Basic Financial Statements .......................................................................................................... 38
City of San Mateo
Comprehensive Annual Financial Report
For the year ended June 30, 2004
Table of Contents, Continued
ii
Page
FINANCIAL SECTION, Continued
Required Supplementary Information:
Budgets and Budgetary Accounting................................................................................................... 86
Defined Pension Plan........................................................................................................................... 90
Supplementary Information:
Non- Major Governmental Funds:
Combining Balance Sheet..................................................................................................................... 94
Combining Statement of Revenues, Expenditures and Changes in Fund Balances.................... 98
Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual:
Police Grants Special Revenue Fund.......................................................................................... 102
Community Development Block Grant Special Revenue Fund............................................. 103
Fire Protection Special Revenue Fund ....................................................................................... 104
HOME Special Revenue Fund .................................................................................................... 105
Gas Tax Special Revenue Fund................................................................................................... 106
Construction Services Special Revenue Fund........................................................................... 107
Advance Planning Special Revenue Fund ................................................................................ 108
Parking Special Revenue Fund ................................................................................................... 109
Solid Waste Special Revenue Fund ............................................................................................ 110
Landfill Bond Debt Service Fund ............................................................................................... 111
General Obligation Debt Service Fund ...................................................................................... 112
Parking Bonds Debt Service Fund.............................................................................................. 113
Internal Service Funds:
Combining Statement of Net Assets................................................................................................. 116
Combining Statement of Activities and Changes in Net Assets................................................... 118
Combining Statement of Cash Flows ............................................................................................... 120
STATISTICAL SECTION ( Unaudited)
General Government Revenues by Source – Last Ten Fiscal Years .......................................................... 124
General Government Expenditures by Function – Last Ten Fiscal Years ................................................ 125
Assessed Value of Real and Personal Property – Last Ten Fiscal Years................................................... 126
Property Tax Rates – All Direct and Overlapping Governments – Last Ten Fiscal Years ..................... 127
Special Assessments Billings and Collections – Last Ten Fiscal Years ..................................................... 128
City of San Mateo
Comprehensive Annual Financial Report
For the year ended June 30, 2004
Table of Contents, Continued
iii
Page
STATISTICAL SECTION ( Unaudited), Continued
Computation of Direct and Overlapping Debt ............................................................................................ 129
Computation of Legal Debt Margin............................................................................................................... 130
Demographic Statistics – Last Ten Fiscal Years ........................................................................................... 131
Revenue Bond Coverage – Sewer Enterprise Fund – Last Ten Fiscal Years ............................................ 132
Property Values and Construction – Ten Fiscal Years ................................................................................ 133
Principal Taxpayers...................................................................................................................... ................... 134
Property Tax Levies and Collection – Last Ten Fiscal Years...................................................................... 135
Ratio of Annual Debt Service Expenditures - General Bonded Debt to
Total General Governmental Expenditures - Last Ten Fiscal Years ................................................... 136
Ratio of Net General Obligation Bonded Debt to Assessed Value and
Net Bonded Debt Per Capita - Last Ten Years....................................................................................... 137
Miscellaneous Statistics ............................................................................................................................... ... 138
iv
v
November 12, 2004
Honorable Mayor
Members of the City Council
City of San Mateo, California
The Comprehensive Annual Financial Report ( CAFR) of the City of San Mateo, California for the
fiscal year ended June 30, 2004 is hereby submitted. The CAFR includes the independent auditor’s
report. The City Charter ( Section 5.26) requires that an independent Certified Public Accountant,
hired by the City Council, conduct an annual audit of the City’s financial transactions and issue
appropriate reports to the City Council.
Responsibility for both the accuracy of the data and the completeness and fairness of the
presentation, including all disclosures, rests with the City. We believe that the data enclosed is
accurate in all material respects, and are presented in a manner designed to fairly set forth the
financial position and results of operations of the City. All significant disclosures necessary to
enable the reader to gain an understanding of the City's financial affairs have been included.
Caporicci and Larson, a firm of licensed certified public accountants, have audited the City of
San Mateo’s financial statements.
The analysis of the financial condition and the result of operations are in the Management’s
Discussion and Analysis document in the Financial Section.
This Comprehensive Annual Financial Report is presented in three sections:
1. Introductory Section - This section includes this transmittal letter, the City's organizational
chart, a list of municipal officers, and most recent certificates awarded to the City for
excellence in financial reporting.
2. Financial Section - Included in this section are the Auditor’s Report, Management’s
Discussion and Analysis, Basic Financial Statements, Combining and Individual Fund
Statements, and the required schedules and information.
3. Statistical Section - Although this section contains substantial financial information, these
tables differ from financial statements in that they present some non- accounting data, cover
multiple fiscal years, and are designed to provide demographic and economic data and
reflect financial trends.
vi
Profile of the City
The City was incorporated in 1894, and was originally chartered in 1922. The current charter was
adopted in 1971 and revised in 2002. San Mateo has a Council- Manager form of government. The
five Council members serve at- large for four- year terms. The Council selects a Mayor from among
its members each December for a one- year term. The City Manager, appointed by the Council,
serves as chief executive officer and is responsible for the day- to- day administration of City affairs.
The City Council also appoints a City Attorney. There are nine Advisory Boards and
Commissions that are appointed by the City Council.
The City of San Mateo is located in San Mateo County, on the Peninsula in the San Francisco Bay
Area. Burlingame borders it to the north, Foster City to the east, Belmont to the south,
Hillsborough and San Mateo County to the west. The City is conveniently situated 19 miles south
of San Francisco and 30 miles north of San Jose. It covers an area of 14.6 square miles, including
3.87 square miles of tidelands from San Francisco Bay to the east and a range of coastal mountains
to the west. The population of San Mateo was approximately 72,000 in 1970 and 93,721 as of
January 2004.
The City provides a full range of municipal services. These include police and fire protection,
public works, parks & recreation, library, planning and zoning, building, sewer service, street
maintenance, economic development, and general administrative services. The City offers thirty
parks, six recreation centers, three libraries, and an 18- hole golf course. California Water Service, a
private company, provides water to the residents of the City of San Mateo. The San Mateo
Performing Arts Center hosts productions by numerous local, regional, and international artistic
enterprises, including the Peninsula Ballet Theatre, the Peninsula Civic Light Opera, and the
Peninsula Symphony. San Mateo has abundant shopping areas, including two major regional
shopping centers, Hillsdale Shopping Mall and Bridgepointe.
The City operates on a two- year budget cycle ( Business Plan). The two- year budget process
requires that each department submit two one- year expenditure plans and revenue estimates to
the City Council for approval. In each alternate year the Department Heads present mid- cycle
performance reports to the City Manager and City Council to summarize budget status to date and
to obtain approval for year- 2 funding. The Department Heads are responsible for containing
expenditures within their budgeted appropriations as approved by the City Council. The level of
budgetary control is the department within each fund. The City also maintains an encumbrance
accounting system as one technique of accomplishing budgetary control. Encumbered amounts in
the operating budget lapse one year after the end of the fiscal year. The City utilizes a five- year
plan for capital improvements. The plan serves as a guide for the allocation of future resources.
However, specific funding in the budget covers one year only.
vii
The City's management has adopted a set of " organizational principles" which reflect the
management philosophy. These principles are: service to the community is our purpose; we all
work for one organization; look at the long term; seek constant improvement; and lead by
example. These principles are intended to guide management actions throughout the City
organization.
The goals of City management are to see that necessary and desired services are provided in an
efficient and effective manner, and that planning and improvement take place to provide for the
community's future.
Factors Affecting Financial Condition
Revenues. The City’s overall financial condition remained stable in fiscal year 2003- 04, despite flat
general fund revenues. The economic recovery continues at a slow pace contributing to further
decline in sales and hotel taxes. The assessed valuation of property, the highest in San Mateo
County, grew 6% in 2003- 04 over the prior year.
State Budget. The State budget problem resulted in the City losing an additional $ 1.7 million in
03- 04 and, it is expected that the City will lose $ 1.5 million in each of the next two fiscal years. The
passage on the November 2004 ballot of a State Proposition that limits the ability for the State to
take money from local governments will provide more financial certainty in the future.
Appropriations Limit. The City remained well below the voter mandated Gann Appropriations
Limit for the fiscal year 2003- 04, reaching only 51.9% of the legal limit. The Gann Limit was $ 104.3
million and the City’s appropriations subject to the limit were $ 54.2 million.
Cash Management. The City follows the practice of pooling cash and investments of all funds
with the City Treasurer. The City maintains these temporarily idle funds under the " prudent
person" rule. This affords the City a broad spectrum of investment opportunities as long as the
investment is deemed prudent and allowable under current legislation of the State of California,
and the terms of the City's Investment Policies. Investment policies are reviewed by the outside
investment advisory committee and City Council each year; also, Quarterly Investment Reports
appear on the Council’s agenda.
At the end of the fiscal year the City’s Portfolio, excluding invested bond proceeds, stood at $ 96.4
million. The average yield for the year was 2.16% ( 365 day equivalent), and the City earned $ 2.0
million in interest income. The recognized investment income in the financial statements includes
the effect of market value fluctuations. This approach resulted in a recognized return of 0.65% ( as
compared to the 2.16% without adjusting for market value fluctuations). The City’s investment
practice of “ hold to maturity” will, over time, offset the effect of market fluctuations on reported
earnings.
viii
Risk Management. The City operated two Risk Management programs: General Liability and
Workers' Compensation, with insurance coverage of $ 10 million per occurrence and
deductible/ self- insurance amounts of $ 500,000 ($ 250,000 beginning fiscal year 04- 05) for general
liability and $ 1,000,000 for workers compensation. The General Liability program receives its
funding from the general fund ( and indirectly from other funds thru indirect cost allocation). The
Workers' Compensation Program receives its funding through charges to the benefiting
departments/ funds of the City. Both programs are reported as internal service funds.
Pension and Other Post Employment Benefits. The City provides retirement benefits to its
employees thru a contract with the California Public Employees Retirement System ( PERS). This is
a defined benefit program under which the City is obligated to fund the plan to ensure that it will
fully meet its obligations. The plan is funded with employee and employer contributions. The
employee contribution rate is fixed ( 9% for safety and 7% for non safety). The employer
contribution rates are set each year by PERS based on annual actuarial studies.
The City also contributes $ 160 per month towards retiree health premiums. PERS also administers
this program. At the end of the fiscal year there were 374 retired employees receiving this benefit.
Awards and Acknowledgments
Certificates of Achievement. The Government Finance Officers Association of the United States
and Canada ( GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to
the City for its Comprehensive Annual Financial Report ( CAFR) for the fiscal year ended June 30,
2003 as it did for the preceding thirteen years.
The California Municipal Finance Officers Association ( CSMFO) also awarded a Certificate for
Outstanding Financial Reporting to the City for its CAFR for the fiscal year ended June 30, 2003
As it did for the preceding fourteen years.
To be awarded a Certificate of Achievement, a governmental unit must publish an easily readable
and efficiently organized CAFR, whose contents conform to program standards. Such reports
must satisfy both generally accepted accounting principles and applicable legal requirements.
These certificates are valid for a period of one year. We believe our current report continues to
conform to both Certificate requirements, and we are submitting it to GFOA and CSMFO to
determine its eligibility for another certificate.
ix
Acknowledgements. The preparation of the comprehensive annual financial report on a timely
basis was made possible by the dedicated service of the entire staff of the Finance Department and
our auditors from Caporicci and Larson. Each member of the department and the audit team has
our sincere appreciation for the contributions made in the preparation of this report.
In closing, the staff wishes to express deep appreciation to the Council for their leadership and
support and especially for their responsiveness to the financial concerns of the City.
Sincerely,
ARNE L. CROCE JOHN L. de RUSSY
City Manager Finance Director/ City Treasurer
x
INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor and Members of the City Council
of the City of San Mateo
San Mateo, California
We have audited the accompanying financial statements of the governmental activities, the business- type
activities, each major fund, and the aggregate remaining fund information of the City of San Mateo,
California ( City), as of and for the year ended June 30, 2004, which collectively comprise the City’s basic
financial statements as listed in the table of contents. These financial statements are the responsibility of the
City’s management. Our responsibility is to express an opinion on these financial statements based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards in the United States and
the standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall basic financial statement presentation. We believe that
our audit provides a reasonable basis for our opinions.
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business- type activities, each major fund,
and the aggregate remaining fund information of the City as of June 30, 2004, and the respective changes in
financial position and cash flows, where applicable, thereof for the year then ended in conformity with
generally accepted accounting principles in the United States.
As described in Note 1 to the basic financial statements, the City adopted statement of the Governmental
Accounting Standards Board No. 40, Deposit and Investment Risk Disclosures ( Amendment of GASB No. 3).
In accordance with Government Auditing Standards, we have also issued our report dated September 17, 2004
on our consideration of the City’s internal control over financial reporting and on our tests of its compliance
with certain provisions of laws, regulations, contracts, and grants. That report is an integral part of an audit
performed in accordance with Government Auditing Standards and should be read in conjunction with this
report in considering the results of our audit.
The accompanying Required Supplementary Information, such as management’s discussion and analysis,
budgetary comparison information and other information as listed in the table of contents, is not a required
part of the basic financial statements but is supplementary information required by the Governmental
Accounting Standards Board. We have applied certain limited procedures, which consisted principally of
inquires of management regarding the methods of measurement and presentation of the Required
Supplementary Information. However, we did not audit the information and express no opinion on it.
2
To the Honorable Mayor and Members of the City Council
of the City of San Mateo
San Mateo, California
Page 2
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City’s basic financial statements. The accompanying supplementary information is presented
for purpose of additional analysis and is not a required part of the basic financial statements. The
supplementary information has been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole. The introductory and statistical sections have not been subjected to
the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express
no opinion on them.
Oakland, California
September 17, 2004
3
Management's Discussion and Analysis
As management of the City of San Mateo, we offer readers of the City’s financial statements this
narrative overview and analysis of the financial activities of the City for the fiscal year ended
June 30, 2004.
We encourage readers to consider the information presented here in conjunction with additional
information that we have furnished in our letter of transmittal, which can be found on page v of
this report.
I. Financial Highlights
• The assets of the City of San Mateo exceeded its liabilities at the close of the fiscal year by
$ 402M ( Net Assets). Of this amount $ 297M was invested in capital assets, net of related
debt. The balance was restricted for capital projects, $ 88M, debt service and other 17M, and
unrestricted $ 2M. This includes all City funds and Redevelopment Agency.
• The City's total net assets increased by $ 3M; representing $ 1M increase in governmental and
$ 2M increase in Business- Type Activities.
• As of the close of the fiscal year, the City’s Governmental funds, including the general,
special revenue, debt service, capital projects, and redevelopment funds, reported combined
ending fund balances of $ 117M, an increase of $ 6M in comparison with the prior year.
Approximately $ 18M is available for spending at the government's discretion on operating
activities ( of which $ 8M is in the General Fund) and $ 25M is available for and committed to
the capital projects ( unreserved fund balance), both of which are subject to restrictions
relating to the various funding sources.
• At the end of the current fiscal year, unreserved fund balance for the general fund was $ 8M,
or 14 percent of total General Fund expenditures. This amount includes $ 4M emergency
reserve, $ 2M service stability reserve, and $ 0.35M undesignated.
• The total net bonded debt increased was $ 45M during the fiscal year. The increase was due
to the issuance of $ 23M in general obligation bonds ( the balance of $ 35M voter approved
bonds) for the construction of the new main library, $ 16M sewer revenue bonds, and $ 8M
landfill closure bonds, as reduced by the annual repayment of the previously issued bonds.
II. Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the City of San Mateo’s
Basic Financial Statements. The City of San Mateo’s Basic Financial Statements are comprised of
three components: 1) Government- Wide Financial Statements, 2) Fund Financial Statements, and
3) Notes to the Financial Statements. This report also contains other supplementary information in
addition to the Basic Financial Statements themselves.
4
Government- Wide Financial Statements The Government- Wide Financial Statements consist of a
statement of net assets and a statement of activities and are designed to provide readers with a
broad overview of the City’s finances, in a manner similar to a private- sector business.
The Statement of Net Assets presents information on all of the City’s assets and liabilities, with the
difference between the two reported as net assets. Over time, increases or decreases in net assets
may serve as a useful indicator of changes in the City’s financial position.
The Statement of Activities presents information showing how the government's net assets
changed during the most recent fiscal year. All changes in net assets are reported as soon as the
underlying event giving rise to the change occurs, regardless of the timing of related cash flows.
Thus, revenues and expenses are reported in this statement for some items that will only result in
cash flows in future fiscal periods ( e. g., uncollected taxes and earned but unused vacation leave).
Both of the Government- Wide Financial Statements distinguish functions of the City that are
principally supported by taxes and intergovernmental revenues ( Governmental Activities) from
other functions that are intended to recover all or a significant portion of their costs through user
fees and charges ( Business- Type Activities). The Governmental Activities of the City include
general government, public safety, public works, community and economic development, and
parks and recreation and library. The Business- Type Activities of the City include a Sewer and
Golf operations.
The Government- Wide Financial Statements include not only the City itself but also the
Redevelopment Agency. Financial information for this component unit is blended with the
financial statements of the primary government itself. The Redevelopment Agency, although also
legally separate, functions for all practical purposes as a department of the City, and therefore has
been included as an integral part of the primary government.
The Government- Wide Financial Statements can be found on pages 17- 21 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, 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 can be divided into three
categories: Governmental funds, Proprietary funds, and Fiduciary funds.
Governmental Funds. Governmental funds are used to account for essentially the same functions
reported as Governmental Activities in the Government- Wide Financial Statements. However,
unlike the Government- Wide Financial 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 a government'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.
5
By doing so, readers may better understand the long- term impact of the government'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 Governmental Funds comprise 17 individual funds. Information is presented separately in
the Governmental Fund Balance Sheet and the Governmental Fund Statement of Revenues,
Expenditures, and Changes in Fund Balances for the General, Redevelopment, City Housing, and
General Projects Capital Projects funds, which are considered to be major funds. Data from the
non- major 13 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.
A budgetary comparison statement has been provided for the funds that have an adopted budget
to demonstrate compliance with this budget.
The basic Governmental Fund Financial Statements can be found on pages 25- 32 of this report.
Proprietary Funds The City maintains two different types of Proprietary funds. 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 its Sewer and Golf
operations. Internal Service funds are an accounting device used to accumulate and allocate costs
internally among the City’s various functions.
The City uses Internal Service funds to account for its General Liability, Fleet and Building
Maintenance, Vehicle and Equipment Replacement, Worker’s Compensation Insurance, Dental
Self- Insurance, and Benefits for employees. Because these services predominantly benefit
governmental rather than business- type functions, they have been included within the
Governmental Activities in the Government- Wide Financial Statements.
Proprietary funds provide the same type of information as the Government- Wide Financial
Statements, only in more detail. The Proprietary Fund Financial Statements provide separate
information for the Sewer and Golf operations. Conversely the Internal Service funds are
combined into a single, aggregated presentation in the Proprietary Fund Financial Statements.
Individual fund data for the Internal Service funds is provided in the form of combining
statements elsewhere in this report.
The Proprietary Fund Financial Statements can be found on pages 33- 36 of this report.
6
Notes to the Basic Financial Statements The notes 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 Basic Financial Statements can be found on pages 37- 82 of this report.
Other Information In addition to the Basic Financial Statements and accompanying notes, this
report also presents certain required supplementary information concerning the City’s progress in
funding its obligation to provide pension benefits to its employees. The Required Supplementary
Information can be found on page 86- 90 of this report.
The combining statements referred to earlier in connection with the Non- Major Governmental
funds and the Internal Service funds are presented immediately following the Required
Supplementary Information on pensions. Combining and individual fund statements and
schedules can be found on pages 91- 121 of this report.
III. Government- Wide Financial Statement Analysis
Statement of Net Assets. As noted earlier, net assets may serve over time as a useful indicator of a
government's financial position. In the case of the City, total assets exceeded liabilities by $ 402M
at the close of the fiscal year.
By far the largest portion of the City of San Mateo’s Net Assets ( 73%) reflect its investment in
capital assets ( e. g., infrastructure, 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 citizens; consequently, these assets are not available for future spending.
Although the City of San Mateo’s investment in its 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
i. e. future income, since the capital assets themselves cannot be used to liquidate these liabilities.
An additional portion of the City of San Mateo’s Net Assets ( 11%) represents resources that are
subject to external restrictions on how they may be used. The remaining balance, ( 16%), of
unrestricted net assets that may be used to meet the government's ongoing obligations to citizens
and creditors, subject to restrictions of various funding sources as applicable.
7
CITY OF SAN MATEO’S NET ASSETS
June 30, 2004
( Amounts expressed in millions)
2003 2004 2003 2004 2003 2004
Current and other assets $ 168 $ 179 $ 27 $ 4 4 $ 1 95 $ 223
Capital Assets, net of depreciation 276 304 91 91 367 395
Total assets 444 483 118 135 562 618
Long- term liabilities outstanding 102 132 40 55 142 187
Other liabilities 23 26 3 3 26 29
Total liabilities 125 158 43 58 168 216
Net assets:
Invested in capital assets, net of
related debt 245 240 50 57 295 297
Restricted 59 98 24 5 83 103
Unrestricted 15 ( 13) 1 15 16 2
Total net assets $ 319 $ 325 $ 75 $ 7 7 $ 3 94 $ 402
Governmental
Activities
Business- Type
Activities Total
At the end of the fiscal year 2003- 04, the City is able to report positive balances in all three
categories of net assets, both for the government as a whole. The net assets increased by $ 3M
during the fiscal year. This increase is the net result of all the revenues and expenses and cannot
be attributed to any specific items.
Governmental Activities Governmental Activities increased the City’s net assets by $ 1M. The
charts that follow show the program revenues, general revenues, and expenses by function for all
Governmental City activities, including the Redevelopment Agency.
8
Revenues by Source - Governmental Activities
Sales taxes
16%
Operating
grants and
contributions
7%
Property taxes
31%
Franchise fees
2%
Charges for
services 16%
Other taxes
14%
Other 0%
Motor vehicle in
lieu fees 5%
Capital grants
and
contributions
9%
Expenses by Function - Governmental Activities
Public safety,
40%
Public works,
15%
Interest on long-term
debt
( unallocated),
6%
Community
development,
9%
General
government,
11%
Library, 5%
Parks and
recreation, 14%
9
CITY OF SAN MATEO
Statement of Changes in Net Assets
For the Year Ended June 30, 2004
02- 03 03- 04 02- 03 03- 04 02- 03 03- 04
Revenues:
$ 1 5.6 $ 1 5.2 $ 17.4 $ 18.0 $ 33.0 $ 33.2
5 .8 6 .0 - - 5.8 6.0
1 3.5 8 .5 - - 13.5 8 .5
2 8.5 29.4 - - 28.5 29.4
1 6.8 15.1 - - 16.8 15.1
1 3.0 13.1 - - 13.0 13.1
1 .7 1 .8 - - 1.7 1.8
5 .4 4 .3 - - 5.4 4.3
1 .6 0 .7 0.7 0.2 2.3 0.9
1 01.9 9 4.1 18.1 18.2 120.0 112.3
Expenses:
8 .2 8 .1 - - 8.2 8.1
1 1.0 11.5 - - 11.0 11.5
3 4.6 36.1 - - 34.6 36.1
9 .4 1 3.5 - - 9.4 13.5
1 1.8 12.4 - - 11.8 12.4
4 .6 4 .1 - - 4.6 4.1
Non- departmental - 1.8 - - - 1 .8
5 .2 5 .2 - - 5.2 5.2
9 .5 - - - 9.5 -
- - 15.7 13.6 15.7 13.6
- - 3.1 2.9 3.1 2.9
9 4.3 92.7 18.8 16.5 113.1 109.2
Increase in net assets 7.6 1 .4 ( 0.7) 1 .7 6.9 3.1
Net assets - Beginning of fiscal year, as restated 3 11.6 3 23.6 75.9 75.2 387.5 398.8
Net assets - Ending of fiscal year $ 319.2 $ 3 25.0 $ 75.2 $ 76.9 $ 394.4 $ 401.9
Depreciation expense ( unallocated)
Sewer
Golf
Total expenses
Public works
Parks and recreation
Library
Interest on long- term debt ( unallocated)
Other
General government
Community development
Public safety
Sales taxes
Other taxes
Franchise fees
Motor vehicle in lieu fees
Governmental
Activities Total
Business- Type
Activities
Total revenues
Program revenues:
Charges for services
Operating grants and contributions
Capital grants and contributions
General revenues:
Property taxes
• Charges for services are primarily fees for recreation, building, planning, engineering, golf, and
sewer services
• Operating and capital grants and contributions include Federal and State grants and other
governments and private contributions including impact fees.
• Property taxes include the general, voter- approved debt service, and the redevelopment
property taxes
• Other taxes include mainly hotel, business, property transfer, and gas taxes
• Motor vehicle in lieu fees decreased as a result of the State take away to help balance its budget
10
• General government expenses include City Council, City Clerk, City Manager, City Attorney,
Human Resources, Finance, and Information Technology departments, and the general liability
insurance
• Community Development expenses include planning, building, housing, neighborhood
improvements, code enforcement, economic development, and the Redevelopment Agency
( including capital expenditure)
• Public Safety expenses cover Police and Fire services
• Public Works expenses are for engineering, streets, streetlights, and traffic signals operations
and maintenance
• Parks and Recreation expenses cover the operations and maintenance of the City parks,
community centers, and the senior center as well as the recreation services
• Library expenses are for the operation and maintenance of one main and two branch libraries.
The main library has been relocated to a temporary leased space while the new main library is
being constructed on the existing site
Business- Type Activities. Business- Type Activities net assets increased by $ 1.7M. The Golf and
Sewer Enterprise activities are fully supported by fees. Their expenses include indirect costs and
in lieu fees of $ 1.6M charged by the General Fund for support and general City services.
Expenses by Function - Business-type
Activities
Sew er,
82%
Golf,
18%
IV. Financial Analysis of the Government’s Funds
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with
finance- related legal requirements.
Government Funds The focus of the City of San Mateo’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 a government's net resources available for spending
at the end of the fiscal year. It should, however, be noted that most of the unreserved amounts
have been designated by the City Council for specific uses.
As of the end of the current fiscal year, the City of San Mateo’s Governmental Funds reported
combined ending fund balances of $ 117M, an increase of $ 6M in comparison with the prior year.
Revenues by Source - Business- type
Activities
Charges
for
services
99%
Other 1%
11
Approximately $ 19M is available for spending at the government's discretion ( unreserved fund
balance) on operating activities and $ 25M is available and committed to the capital projects, both
subject to restrictions relating the various funding sources.
The remainder of fund balance is reserved to indicate that it is not available for new spending
because it has already been committed 1) to pay for existing contracts and purchase orders ($ 55M),
2) to pay debt service ($ 11M), and 3) property held for resale ($ 7M).
The General Fund is the chief operating fund of the City. At the end of the current fiscal year
unreserved fund balance of the General Fund was $ 8M, while total fund balance was $ 9M. 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 14% of total
General Fund expenditures, while total fund balance represents 15% of that same amount.
The General Fund balance increased by $ 0.1M during the current fiscal year.
The Redevelopment fund has a total fund balance of $ 43M, most of which is reserved for capital
projects and debt service. The net decrease in fund balance during the current year in the RDA
was $ 5M, primarily due to the planned use of funds for the capital projects.
Proprietary Funds. The City of San Mateo proprietary funds provide the same type of information
found in the Government- Wide Financial Statements, but in more detail.
Unrestricted Net Assets of the Sewer fund at the end of the year amounted to $ 17M, and those for
the golf operation amounted to -$ 0.1M. The total growth in net assets for both funds was $ 2M and
-$ 0.1M, respectively. Other factors concerning the finances of these two funds have already been
addressed in the discussion of the City of San Mateo’s Business- Type Activities.
V. General Fund Budgetary Highlights
The General Fund expenditures came under the budget by $ 3M. The operating expenditure
savings were the result of a citywide effort to cut costs in order to cope with increased expenses, in
particular retirement costs, while facing low growth in ongoing revenues. The General Fund total
revenues were below the adopted budget estimates by $ 2M, primarily due to shortfall in sales tax
and interest income.
The amendments to the General Fund budget during the year included carry over encumbrances
of the prior year of $ 0.5M, and the transfer to the Worker’s Compensation Insurance and
Comprehensive Liability Insurance funds of $ 2M.
The General Fund budgetary ending fund balance of $ 2 M was $ 1M better than expected when the
04- 05 budgets was adopted. Up to half of this $ 1M is subject to the “ variable pay” provision of the
agreements with the employee bargaining groups whereby one time unanticipated savings are
distributed when compensation adjustments to market median are not provided.
12
During the current fiscal year, unreserved fund balance in the general fund increased from $ 8M to
$ 9M, representing $ 4M Emergency Reserve, $ 2M Service Stability Reserve, $ 2M designated for
future year’s expenditure, $ 0.35M designated for variable pay, and $ 0.35M undesignated.
VI. Capital Asset and Debt Administration
Capital Assets The City of San Mateo’s investment in capital assets for its Governmental and
Business- Type Activities as of June 30, 2004, amounts to $ 395M ( net of accumulated depreciation).
This investment in capital assets includes land, buildings, improvements, machinery and
equipment, park facilities, roads, highways, bridges, sewer and storm systems, and the golf course.
The total increase in the City’s investment in capital assets net of depreciation for the current fiscal
year was $ 28M or 7.6% ( a 10% increase for Governmental Activities and a 0.5% increase for
Business- Type Activities).
Major Capital asset events during the current fiscal year included the following: Police Station
$ 7M, Street Reconstruction & Rehab $ 5M, Hillsdale Bridge @ Marina Retrofit $ 4M, New Library
$ 4M, Library Branch Improvements $ 2M, Shoreline Park Improvements $ 3M, Housing Projects
$ 2M, East Third Avenue Landfill Closure $ 3M, Main Street Pedestrian Improvements $ 1M, and
Sewer Collection System Rehab $ 1M.
CITY OF SAN MATEO
Capital Assets
( Net of depreciation)
02- 03 03- 04 02- 03 03- 04 02- 03 03- 04
Non- depreciable assets:
Land $ 35.2 $ 42.4 $ 4 .2 $ 4 .2 $ 3 9.4 $ 46.6
Construction in progress 16.4 3 4.6 13.3 1 6.3 2 9.7 50.9
Total non- depreciable assets 51.6 7 7.0 17.5 2 0.5 6 9.1 97.5
Depreciable assets ( net of depreciation):
Building and improvements 17.5 1 6.5 10.4 1 0.1 2 7.9 26.6
Treatment plant & transmission lines - - 6 2.3 6 0.4 6 2.3 60.4
Machinery and equipment 8.2 7 .3 0 .5 0 .3 8 .7 7.6
Infrastructure 1 99.0 2 03.1 - - 199.0 203.1
Total depreciable assets ( net) 224.7 2 26.9 73.2 7 0.8 2 97.9 297.7
Total capital assets $ 2 76.3 $ 303.9 $ 90.7 $ 9 1.3 $ 3 67.0 $ 395.2
Governmental Business- Type
Activities Activities Total
Additional information on the City of San Mateo’s capital assets can be found in Note 6 on page 59
of this report.
13
Long- term Debt At the end of the current fiscal year, the City had total bonded debt outstanding
of $ 174M. Of this amount, $ 37M comprises debt backed by the full faith and credit of the
government. The remainder of the City of San Mateo debt represents bonds secured solely by
specified revenue sources; i. e., the Redevelopment Agency tax increments, and sewer and golf
revenues.
CITY OF SAN MATEO
OUTSTANDING DEBT
General Obligation and Revenue Bonds
( Including Redevelopment)
( In Thousands)
Governmental
Activities
Business- Type
Activities
Total
2003 2004 2003 2004 2003 2004
General obligation bonds $ 15,375 $ 37,455 - - $ 15,375 $ 37,455
Special assessment debt
with City commitment
100 -
- - 100 -
Revenue bonds 74,855 81,215 40,375 55,520 115,230 136,735
Total $ 90,330 $ 118,670 $ 40,375 $ 55,520 $ 130,705 $ 174,190
• The City of San Mateo’s total debt increased by $ 43M ( 33%) during the current fiscal year.
The increase was due to the issuance of $ 23M in general obligation bonds ( the balance of
$ 35M voter approved bonds) for the construction of the new main library, $ 16M sewer
revenue bonds, and $ 8M landfill closure bonds, as reduced by the annual repayment of the
previously issued bonds.
The City maintained its AA rating from Standard & Poor’s Corporation and Aa2 rating from
Moody's for general obligation debt. The Moody’s rating for the Redevelopment Agency is Baa
( uninsured).
State statutes limit the amount of general obligation debt a governmental entity may issue up to 15
percent of its total assessed valuation. The current debt limitation for the City is $ 1.7 billion and at
June 30, 2004 the City was only at 2.6% of its legal debt limit. Additional information on the City
of San Mateo long- term debt can be found in Note 8 on page 62 of this report.
VII. Economic Factors and Next Year's Budget
The economy at both the national and State level continue to grow at a sluggish rate. The local
economy is further impacted by the slump in the high tech industry and Silicon Valley. We are
also challenged by the rising retirement cost, which is partly caused by the lower performance of
the investments of the Public Employees Retirement System ( PERS).
14
The City has a diverse economic base that includes residential, retail, and commercial assets.
While the sales and hotel taxes have decreased, the property and property transfer taxes increased,
mitigating the impact of the economic slowdown. In 2003- 04 we were able reduce expenditures
without significant impact on services.
We have adopted a balanced budget for the 2004- 05 fiscal year, taking all the known factors into
account.
VIII. Requests for Information
This financial report is designed to provide a general overview of the City of San Mateo’s finances
for all those with an interest in the government's finances. Questions concerning any of the
information provided in this report or requests for additional financial information should be
addressed to the Finance Director, 330 West 20th Avenue, San Mateo, California, 94403.
BASIC
FINANCIAL STATEMENTS
15
16
GOVERNMENT- WIDE
FINANCIAL STATEMENTS
17
18
City of San Mateo
Statement of Net Assets
June 30, 2004
Governmental Business- Type
Activities Activities Total
ASSETS
Current assets:
Cash and investments $ 78,701,363 $ 18,244,661 $ 96,946,024
Restricted cash and investments with fiscal agents 54,339,504 22,072,359 76,411,863
Accounts receivable 3,621,871 813,240 4,435,111
Interest receivable 592,864 90,600 683,464
Taxes receivable 4,991,206 - 4,991,206
Prepaids and supplies 230,765 106,548 337,313
Property held for resale 6,810,498 - 6,810,498
Total current assets 149,288,071 41,327,408 190,615,479
Noncurrent assets:
Deferred charges - 2,084,384 2,084,384
Loans and notes receivable, net 29,525,236 - 29,525,236
Capital assets:
Non- depreciable 76,998,316 20,593,007 97,591,323
Depreciable, net 226,938,844 70,675,531 297,614,375
Total capital asset 303,937,160 91,268,538 395,205,698
Total noncurrent assets 333,462,396 93,352,922 426,815,318
Total assets 482,750,467 134,680,330 617,430,797
LIABILITIES
Current liabilities:
Accounts payable 8,224,197 348,210 8,572,407
Interest payable 2,167,248 1,106,287 3,273,535
Retentions payable 968,252 - 968,252
Accrued salaries and wages payable 1,708,584 143,175 1,851,759
Deposits payable 4,067,646 154,686 4,222,332
Claims and judgments payable - due within one year 1,500,000 - 1,500,000
Landfill closure and postclosure cost payable - due within one year 4,916,500 - 4,916,500
Vacation and sick leave payable - due within one year 455,000 - 455,000
Bonds payable - due within one year 1,820,000 1,220,000 3,040,000
Total current liabilities 25,827,427 2,972,358 28,799,785
Noncurrent liabilities:
Deferred revenue ( unearned) 968,487 - 968,487
Claims and judgments payable - due in more than one year 6,059,000 - 6,059,000
Landfill closure and postclosure costs payable - due in more than one year 3,675,000 - 3,675,000
Vacation and sick leave payable - due in more than one year 3,614,329 487,890 4,102,219
Bonds payable - due in more than one year 118,050,000 54,300,000 172,350,000
Total noncurrent liabilities 132,366,816 54,787,890 187,154,706
Total liabilities 158,194,243 57,760,248 215,954,491
NET ASSETS
Invested in capital assets, net of related debt 239,580,485 56,860,575 296,441,060
Restricted for:
Capital projects 86,059,189 1,763,797 87,822,986
Debt service 10,998,514 3,279,104 14,277,618
Special projects 1,411,805 - 1,411,805
Total restricted 98,469,508 5,042,901 103,512,409
Unrestricted ( 13,493,769) 15,016,606 1,522,837
$ 324,556,224 $ 76,920,082 $ 401,476,306
Primary Government
See accompanying Notes to Basic Financial Statements.
Total net assets
19
City of San Mateo
Statement of Activities and Changes in Net Assets
For the year ended June 30, 2004
Operating Capital
Charges for Grants and Grants and
Functions/ Programs Expenses Services Contributions Contributions Total
Primary Government:
Governmental activities:
General government $ 8,103,023 $ 2,622,148 $ 481,705 $ - $ 3,103,853
Community development 11,544,360 3,638,262 911,483 70,000 4,619,745
Public safety 36,112,283 2,840,509 1,164,567 5,652 4,010,728
Public works 13,496,669 3,189,229 3,262,478 6,342,929 12,794,636
Parks and recreation 12,417,960 2,592,051 6,100 846,625 3,444,776
Library 4,136,444 321,262 149,603 1,276,552 1,747,417
Non- departmental 1,810,177 - - - -
Interest on long- term debt ( unallocated) 5,263,065 - - - -
Total governmental activities 92,883,981 15,203,461 5,975,936 8,541,758 29,721,155
Business- type activities:
Sewer 13,572,439 14,687,151 - 613,476 15,300,627
Golf 2,890,138 2,732,670 - - 2,732,670
Total business- type activities 16,462,577 17,419,821 - 613,476 18,033,297
Total primary government $ 109,346,558 $ 32,623,282 $ 5,975,936 $ 9,155,234 $ 47,754,452
General Revenues:
Taxes and fees:
Property taxes
Sales taxes
Other taxes
Franchise fees
Motor vehicle fees
Total taxes and fees
Investment earnings
Loss on sale of assets
Total general revenues
Change in net assets
Net assets - beginning of year, as restated ( Note 15)
Net assets - end of year
See accompanying Notes to Basic Financial Statements.
Program Revenues
20
Governmental Business- Type
Activities Activities Total
$ ( 4,999,170) $ - $ ( 4,999,170)
( 6,924,615) - ( 6,924,615)
( 32,101,555) - ( 32,101,555)
( 702,033) - ( 702,033)
( 8,973,184) - ( 8,973,184)
( 2,389,027) - ( 2,389,027)
( 1,810,177) - ( 1,810,177)
( 5,263,065) - ( 5,263,065)
( 63,162,826) - ( 63,162,826)
- 1,728,188 1,728,188
- ( 157,468) ( 157,468)
- 1,570,720 1,570,720
( 63,162,826) 1,570,720 ( 61,592,106)
29,362,781 - 29,362,781
15,131,986 - 15,131,986
13,118,471 - 13,118,471
1,792,175 - 1,792,175
4,316,676 - 4,316,676
63,722,089 - 63,722,089
683,888 154,023 837,911
( 236,290) - ( 236,290)
64,169,687 154,023 64,323,710
1,006,861 1,724,743 2,731,604
323,549,363 75,195,339 398,744,702
$ 324,556,224 $ 76,920,082 $ 401,476,306
and Changes in Net Assets
Net ( Expense) Revenue
21
22
FUND
FINANCIAL STATEMENTS
Governmental Fund Financial Statements
Proprietary Fund Financial Statements
23
24
GOVERNMENTAL FUND FINANCIAL STATEMENTS
General Fund accounts for resources traditionally associated with government which are not required legally
or by sound financial management to be accounted for in another fund.
Redevelopment Agency Fund accounts for:
a. Revenue and expenditures of the Agency's low and moderate income housing activity. Use of funds is
restricted by law.
b. Tax increment revenues used to pay principal and interest on general long- term debt of the Agency.
c. The acquisition and construction of the Agency's capital projects. Funding is provided by tax increments
transferred in from the Agency's debt service funds.
City Housing Special Revenue Fund accounts for revenues from a former Federal Rental Rehabilitation
program, loan payments from the First Time Homebuyer program, and income generated by contracts for
services provided by the City to other jurisdictions.
General Projects Capital Projects Fund accounts for the expenditures for capital improvements for the City,
including equipment, acquisition and construction of parks, recreation areas, public safety facilities or other
public works. The primary sources of funding are intergovernmental revenues and transfers from other
governmental funds.
Non- Major Governmental Funds is the aggregate of all the non- major governmental funds.
25
City of San Mateo
Balance Sheet
Governmental Funds
June 30, 2004
City General
Redevelopment Housing Projects
General Agency Special Revenue Capital Projects
ASSETS
Cash and investments $ 11,227,461 $ 15,069,654 $ 597,125 $ 25,283,605
Restricted cash and investments held by fiscal agents - 20,923,603 - 32,918,585
Accounts receivable 296,660 - - 2,795,147
Interest receivable 435,608 68,100 - 47,256
Taxes receivable 4,200,464 - - 204,385
Due from other funds 84,635 - - -
Prepaids and supplies 80,765 - - -
Property held for resale - 6,810,498 - -
Loans and notes receivable - 23,852,458 6,486,146 -
Total assets $ 16,325,593 $ 66,724,313 $ 7,083,271 $ 61,248,978
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable $ 914,708 $ 120,423 $ 11,158 $ 6,156,719
Retention payable - - - 968,252
Accrued salaries and wages payable 1,477,437 9,436 - 67,661
Due to other funds - - - -
Deposits payable 3,928,034 - - 129,724
Deferred revenue 739,380 23,852,458 6,486,146 -
Total liabilities 7,059,559 23,982,317 6,497,304 7,322,356
Fund Balances:
Reserved:
Encumbrances 850,286 23,422 25,000 53,426,622
Petty cash 30,800 - - -
Prepaids and supplies 80,765 - - -
Debt service - 9,769,408 - -
Property held for resale - 6,810,498 - -
Unreserved, designated:
Construction - 21,225,924 - -
Help loan repayment - 136,000 - -
Future emergencies 4,000,000 - - -
Sebsequent year's expenditures 1,600,000 1,298,000 - -
Compensation - employee variable pay 352,092
Future years' expenditures - 950,000 - -
Service stability 2,000,000 - - -
Unreserved, undesignated, reported in:
General fund 352,091 - - -
Capital projects - - - 500,000
Special Revenue funds - 2,528,744 560,967 -
Total fund balances 9,266,034 42,741,996 585,967 53,926,622
Total liabilities and fund balances $ 16,325,593 $ 66,724,313 $ 7,083,271 $ 61,248,978
See accompanying Notes to Basic Financial Statements.
Major Funds
26
Non- Major Total
Governmental Governmental
Funds Funds
$ 9,272,864 $ 61,450,709
497,316 54,339,504
530,064 3,621,871
41,900 592,864
586,357 4,991,206
- 84,635
- 80,765
- 6,810,498
6,973,676 37,312,280
$ 17,902,177 $ 169,284,332
$ 291,880 $ 7,494,888
- 968,252
128,432 1,682,966
84,635 84,635
- 4,057,758
7,113,255 38,191,239
7,618,202 52,479,738
461,486 54,786,816
- 30,800
- 80,765
1,177,237 10,946,645
- 6,810,498
3,855,819 25,081,743
- 136,000
- 4,000,000
- 2,898,000
352,092
- 950,000
- 2,000,000
- 352,091
- 500,000
4,789,433 7,879,144
10,283,975 116,804,594
$ 17,902,177 $ 169,284,332
27
28
City of San Mateo
Reconciliation of the Governmental Funds Balance Sheet
to the Government- Wide Statement of Net Assets
June 30, 2004
Total Fund Balances - Total Governmental Funds $ 1 16,804,594
Capital assets used in governmental activities were not current financial resources.
Therefore, they were not reported in the Governmental Funds Balance Sheet. Except for
the internal service funds reported below, the capital assets were adjusted as follows:
Government-
Wide Statement
of Net Assets
Internal Service
Funds
Non- depreciable $ 76,998,316 $ - 7 6,998,316
Depreciable, net 226,938,844 ( 3,418,537) 2 23,520,307
Total capital assets $ 303,937,160 $ ( 3,418,537) 3 00,518,623
Deferred revenue recorded in the Fund Financial statements resulting from activities in
which revenues were earned but funds were not available are reclassified as revenues in the
Government- Wide Financial Statements. 3 7,222,752
Loans and notes receivable were recorded at gross amounts in the Fund Financial
statements. However, in the Government- Wide Financial Statement an estimated amount
for allowance for potential forgiveness has been recorded. ( 8,242,619)
Interest payable on long- term debt did not require current financial resources. Therefore,
interest payable was not reported as a liability in Governmental Funds Balance Sheet. ( 2,167,248)
Internal service funds were used by management to charge the costs of certain activities,
such as insurance, to individual funds. The assets and liabilities of the Internal service
funds were included in governmental activities in the Government- Wide Statement of Net
Assets:
Workers' Compensation Insurance 3 6,319
Dental Self- Insurance 6 9,404
Benefits 6 64,901
Comprehensive Liability Insurance 7 56,419
Fleet & Building Maintenance 1 ,709
Vehicle & Equipment Replacement 1 1,422,199
Total internal service funds 1 2,950,951
Long- term liabilities were not due and payable in the current period. Therefore, they were
not reported in the Governmental Funds Balance Sheet.
Government-
Wide Statement
of Net Assets
Internal Service
Funds
Claims and judgments payable - due within one year $ ( 1,500,000) $ 1,500,000 -
Landfill closure and postclosure cost payable - due within one year ( 4,916,500) - ( 4,916,500)
Vacation and sick leave payable - due within one year ( 455,000) - ( 455,000)
Bonds payable - due within one year ( 1,820,000) - ( 1,820,000)
Claims and judgments payable - due in more than one year ( 6,059,000) 6,059,000 -
Landfill closure and postclosure costs payable - due in more than one year ( 3,675,000) - ( 3,675,000)
Vacation and sick leave payable - due in more than one year ( 3,614,329) - ( 3,614,329)
Bonds payable - due in more than one year ( 118,050,000) - ( 118,050,000)
Total long- term liabilities $ ( 140,089,829) $ 7,559,000 ( 132,530,829)
Net Assets of Governmental Activities $ 3 24,556,224
See accompanying Notes to Basic Financial Statements. 324,556,224
Amounts reported for governmental activities in the Statement of Net Assets were different
because:
29
City of San Mateo
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds
For the year ended June 30, 2004
City
Redevelopment Housing
General Agency Special Revenue
REVENUES:
Property taxes $ 1 8,201,077 $ 9 ,826,556 $ -
Sales taxes 1 5,360,076 - -
Other taxes 1 2,550,508 - -
Special assessments - - -
Licenses, building and other permits 1 ,792,175 - -
Fines, forfeitures and penalties 1 ,237,079 - -
Intergovernmental 4 ,578,842 - -
Charges for services 4 ,926,526 - -
Investment income 1 97,398 8 46,663 1 9,335
Indirect and in- lieu fees - - -
Garbage collection surcharge - - -
Parking meter and lease revenue - - -
Impact fees - - -
Other revenues 2 ,282,868 6 93,394 3 77,605
Total revenues 6 1,126,549 1 1,366,613 3 96,940
EXPENDITURES:
Current:
General government
City Council 2 99,164 - -
City Manager 7 74,804 - -
City Clerk 3 40,154 - -
City Attorney 6 32,257 - -
Business services 2 ,046,146 - -
Information technology 2 ,177,734 - -
Human resources 9 56,835 - -
Community development 5 16,654 2 ,867,898 4 37,707
Public safety
Police 2 0,040,827 2 02,900 -
Fire 1 3,025,833 - -
Public works 3 ,385,719 - -
Parks and recreation 9 ,454,803 - -
Library 4 ,169,051 - -
Non- departmental 8 09,051 1 ,001,126 -
Capital outlay - 7 ,782,000 -
Debt service:
Principal - 1 ,540,000 -
Interest and fiscal charges - 4 ,240,674 -
Total expenditures 5 8,629,032 1 7,634,598 4 37,707
REVENUES OVER ( UNDER) EXPENDITURES 2 ,497,517 ( 6,267,985) ( 40,767)
OTHER FINANCING SOURCES ( USES):
Proceeds from debt issuance - - -
Proceeds from HELP Loan - 1 ,200,000 -
Transfers in 2 ,515,000 - -
Transfers out ( 4,930,000) ( 33,205) -
Total other financing sources ( uses) ( 2,415,000) 1 ,166,795 -
Net change in fund balances 8 2,517 ( 5,101,190) ( 40,767)
FUND BALANCES:
Beginning of year 9 ,183,517 4 7,843,186 6 26,734
End of year $ 9 ,266,034 $ 4 2,741,996 $ 5 85,967
See accompanying Notes to Basic Financial Statements.
Major Funds
30
General Non- Major Total
Projects Governmental Governmental
Capital Projects Funds Funds
$ - $ 1 ,335,148 $ 2 9,362,781
1 ,292,232 - 1 6,652,308
- 5 67,963 1 3,118,471
- 1 83,586 1 83,586
- 3 ,567,738 5 ,359,913
1 6,027 4 ,945 1 ,258,051
8 ,012,452 4 ,011,704 1 6,602,998
4 ,125 5 60,884 5 ,491,535
1 74,897 2 68,619 1 ,506,912
2 06,782 - 2 06,782
5 ,143 9 86,803 9 91,946
- 1 ,463,741 1 ,463,741
1 20,793 - 1 20,793
1 33,977 9 56,876 4 ,444,720
9 ,966,428 1 3,908,007 9 6,764,537
- - 2 99,164
- - 7 74,804
- - 3 40,154
- - 6 32,257
- - 2 ,046,146
- - 2 ,177,734
- - 9 56,835
- 4 ,808,201 8 ,630,460
- 1 ,148,179 2 1,391,906
- 1 ,258,079 1 4,283,912
- 1 ,857,685 5 ,243,404
- - 9 ,454,803
- - 4 ,169,051
- - 1 ,810,177
3 4,361,215 - 4 2,143,215
- 3 ,865,000 5 ,405,000
- 1 ,011,070 5 ,251,744
3 4,361,215 1 3,948,214 1 25,010,766
( 24,394,787) ( 40,207) ( 28,246,229)
3 0,185,375 3 ,559,625 3 3,745,000
- - 1 ,200,000
9 ,805,356 1 98,539 1 2,518,895
( 5,334) ( 8,080,356) ( 13,048,895)
3 9,985,397 ( 4,322,192) 3 4,415,000
1 5,590,610 ( 4,362,399) 6 ,168,771
3 8,336,012 1 4,646,374 1 10,635,823
$ 5 3,926,622 $ 1 0,283,975 $ 1 16,804,594
31
City of San Mateo
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in
Fund Balances to the Government- Wide Statement of Activities and Changes in Net Assets
For the year ended June 30, 2004
Net Change in Fund Balances - Total Governmental Funds $ 6 ,168,771
Capital Outlay
Governmental funds reported capital outlay as expenditures. However, in the
Government- Wide Statement of Activities and Changes in Net Assets, the cost of those
assets was allocated over their estimated useful lives as depreciation expense. This was
the amount of capital assets recorded in the current period. $ 42,143,215 $ ( 9,222,511) 3 2,920,704
Government-
Wide Statement
of Net Assets
Internal Service
Funds
Depreciation expense on capital assets was reported in the Government- Wide Statement
of Activities and Changes in Net Assets, but they did not require the use of current
financial resources. Therefore, depreciation expense was not reported as expenditures in
the Governmental Funds. $ ( 10,058,945) $ 830,065 ( 9,228,880)
Loss on disposal of capital assets was reported in the Governement- Wide Statement of
Activities and Changes in Net Assets, but they did not affect current financial resources.
Therefore, loss on disposal of capital assets was not recognized in the Governmental
Funds. ( 140,796)
Payment of vacation and sick leave payable was an expenditure in governmental funds,
but the payment reduced vacation and sick leave liabilities in the Government- Wide
Statement of Net Assets. ( 17,464)
Bond proceeds provided current financial resources to governmental funds, but
issuing debt increased long- term liabilities in the Government- Wide Statement of
Net Assets. ( 34,945,000)
Payment of landfill closure and postclosure cost payable was an expenditure in
governmental funds, but the payment reduced landfill closure and postclosure cost
liabilities in the Government- Wide Statement of Net Assets. 2 ,507,500
Repayment of bond principal was an expenditure in governmental funds, but the
repayment reduced long- term liabilities in the Government- Wide Statement of Net
Assets. 5 ,405,000
Revenues that have not met the revenue recognition criteria in the Fund Financial
statements are recognized as revenue in the Government- Wide Financial Statements. 1 ,903,923
Loans and notes receivable were recorded at gross amounts in the Fund Financial
statements. However, in the Government- Wide Financial Statement an estimated
amount for allowance for potential forgiveness has been expensed. The following
amount represented the current year amount for allowance for potential forgiveness. ( 3,992,619)
Interest expense on long- term debt was reported in the Government- Wide Statement of
Activities and Changes in Net Assets, but they did not require the use of current financial
resources. Therefore, interest expense was not reported as expenditures in governmental
funds. The following amount represented the change in accrued interest prior year. ( 11,321)
Internal service funds were used by management to charge the costs of certain activities,
such as insurance and fleet management, to individual funds. The net revenue of the
internal service funds was reported with governmental activities. 4 37,043
Change in Net Assets of Governmental Activities $ 1 ,006,861
See accompanying Notes to Basic Financial Statements.
Amounts reported for governmental activities in the Statement of Activities and Changes
in Net Assets were different because:
Repair and
Maintenance
32
PROPRIETARY FUND FINANCIAL STATEMENTS
Sewer Fund accounts for the activities of the wastewater collection and treatment system, which provides
service to the residents of the City and some neighboring cities.
Golf Fund accounts for the activities of the Poplar Creek Golf Course, which provides recreational facilities to
the public.
Internal Service Funds are used to account for the financing of goods and services provided by one
department or agency to other departments or agencies on a cost reimbursement basis.
33
City of San Mateo
Statement of Net Assets
Proprietary Funds
June 30, 2004
Governmental
Activities
Internal
Sewer Golf Total Service Funds
Current assets:
Cash and investments $ 18,011,157 $ 233,504 $ 18,244,661 $ 17,250,654
Restricted cash and investments
with fiscal agents 21,335,707 736,652 22,072,359 -
Accounts receivable 802,774 10,466 813,240 -
Interest receivable 69,700 20,900 90,600 -
Prepaids and supplies - 106,548 106,548 150,000
Total current assets 40,219,338 1,108,070 41,327,408 17,400,654
Noncurrent assets:
Deferred charges 1,997,252 87,132 2,084,384 -
Loans and notes receivable - - - 455,575
Capital assets:
Non- depreciable 20,349,007 244,000 20,593,007 -
Depreciable, net 60,474,628 10,200,903 70,675,531 3,418,537
Total capital assets 80,823,635 10,444,903 91,268,538 3,418,537
Total noncurrent assets 82,820,887 10,532,035 93,352,922 3,874,112
Total assets 123,040,225 11,640,105 134,680,330 21,274,766
Current liabilities:
Accounts payable 199,666 148,544 348,210 729,309
Interest payable 8 84,482 221,805 1,106,287 -
Accrued salaries and wages payable 119,835 23,340 143,175 25,618
Deposits payable 1 53,634 1,052 154,686 9,888
Claims and judgments payable - due within one year - - - 1,500,000
Bonds payable - due within one year 1 ,045,000 175,000 1,220,000 -
Total current liabilities 2 ,402,617 569,741 2 ,972,358 2,264,815
Noncurrent liabilities:
Claims and judgments payable - due in more than one year - - - 6 ,059,000
Vacation and sick leave payable 4 18,023 69,867 487,890 -
Bonds payable - due in more than one year 44,455,000 9,845,000 5 4,300,000 -
Total noncurrent liabilities 4 4,873,023 9,914,867 54,787,890 6,059,000
Total liabilities 47,275,640 10,484,608 57,760,248 8,323,815
Invested in capital assets, net of related debt 56,435,672 424,903 56,860,575 3,418,537
Restricted for:
Capital projects 1,763,797 - 1,763,797 -
Debt service 2,548,510 730,594 3 ,279,104 -
Unrestricted 15,016,606 - 1 5,016,606 9,532,414
Total net assets $ 75,764,585 $ 1,155,497 $ 76,920,082 $ 12,950,951
See accompanying Notes to Basic Financial Statements.
ASSETS
LIABILITIES
NET ASSETS
Enterprise Funds
34
City of San Mateo
Statement of Revenues, Expenses and Changes in Net Assets
Proprietary Funds
For the year ended June 30, 2004
Governmental
Activities
Internal
Sewer Golf Total Service Funds
OPERATING REVENUES:
Charges for services $ 14,558,239 $ 2,524,165 $ 17,082,404 $ 19,424,321
Connection fees 134,162 - 134,162 -
Impact fees 59,187 - 59,187 -
Other 549,039 208,505 757,544 50,944
Total operating revenues 15,300,627 2,732,670 18,033,297 19,475,265
OPERATING EXPENSES:
Costs of sales and services 9,282,169 928,781 10,210,950 18,481,044
Administration 435,604 1,014,967 1,450,571 258,659
Depreciation and amortization 3,081,488 409,705 3,491,193 830,065
Total operating expenses 12,799,261 2,353,453 15,152,714 19,569,768
OPERATING INCOME ( LOSS) 2,501,366 379,217 2,880,583 ( 94,503)
NONOPERATING REVENUES ( EXPENSES):
Interest income 111,329 42,694 154,023 97,040
Loss from sale of capital assets - - - ( 95,494)
Interest expense and fiscal charges ( 773,178) ( 536,685) ( 1,309,863) -
Total nonoperating revenues ( expenses) ( 661,849) ( 493,991) ( 1,155,840) 1,546
INCOME ( LOSS) BEFORE TRANSFERS 1,839,517 ( 114,774) 1,724,743 ( 92,957)
Transfers in - - - 1,530,000
Transfers out - - - ( 1,000,000)
Total transfers in ( out) - - - 530,000
Change in net assets 1,839,517 ( 114,774) 1,724,743 437,043
NET ASSETS:
Beginning of year 73,925,068 1,270,271 75,195,339 12,513,908
End of year $ 75,764,585 $ 1,155,497 $ 76,920,082 $ 12,950,951
See accompanying Notes to Basic Financial Statements.
Enterprise Funds
35
City of San Mateo
Statement of Cash Flows
Proprietary Funds
For the year ended June 30, 2004
Governmental
Activities
Internal
Sewer Golf Total Service Funds
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers/ other funds $ 14,212,705 $ 2,533,632 $ 16,746,337 $ 19,612,961
Cash payments to suppliers for goods and services ( 9,661,440) ( 1,948,784) ( 11,610,224) ( 18,205,603)
Cash received from ( payments to) others 549,039 208,505 757,544 ( 35,339)
Net cash provided ( used) by operating activities 5,100,304 793,353 5,893,657 1,372,019
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Transfers in - - - 1,530,000
Transfers out - - - ( 1,000,000)
Net cash provided by noncapital financing activities - - - 530,000
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:
Acquisition of capital assets ( 3,973,462) ( 1,000) ( 3,974,462) ( 433,074)
Proceeds from sale of capital assets - - - 56,413
Long- term debt repayment ( 1,005,000) ( 150,000) ( 1,155,000) -
Proceeds from debt issuance 16,300,000 - 16,300,000 -
Interest expense and fiscal charges ( 770,834) ( 535,782) ( 1,306,616) -
Net cash provided ( used) by capital and related financing activities 10,550,704 ( 686,782) 9,863,922 ( 376,661)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment income 81,629 41,795 123,424 97,040
Net cash provided ( used) by investing activities 81,629 41,795 123,424 97,040
NET INCREASE ( DECREASE) IN CASH AND CASH EQUIVALENTS 15,732,637 148,366 15,881,003 1,622,398
CASH AND CASH EQUIVALENTS - Beginning of year 23,614,227 821,790 24,436,017 15,628,256
CASH AND CASH EQUIVALENTS - End of year $ 39,346,864 $ 970,156 $ 40,317,020 $ 17,250,654
FINANCIAL STATEMENT PRESENTATION:
Cash and investments $ 18,011,157 $ 233,504 $ 18,244,661 17,250,654
Restricted cash and investments with fiscal agents 21,335,707 736,652 22,072,359 -
Total $ 39,346,864 $ 970,156 $ 40,317,020 $ 17,250,654
RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Operating income ( loss) $ 2,501,366 $ 379,217 $ 2,880,583 $ ( 94,503)
Adjustments to reconcile operating income ( loss)
to net cash provided ( used) by operating activities:
Depreciation and amortization 3,081,488 409,705 3,491,193 830,065
Changes in assets and liabilities:
Accounts receivable ( 546,375) 5,896 ( 540,479) 188,640
Prepaids and supplies - 3,571 3,571 ( 25,000)
Accounts payable 28,473 ( 8,455) 20,018 384,100
Accrued salaries and wages payable 20,350 5,195 25,545 6,717
Deposits payable 7,492 - 7,492 -
Claims and judgments payable - - - 82,000
Vacation and sick leave payable 7,510 ( 1,776) 5,734 -
Total adjustments 2,598,938 414,136 3,013,074 1,466,522
Net cash provided ( used) by operating activities $ 5,100,304 $ 793,353 $ 5,893,657 $ 1,372,019
See accompanying Notes to Basic Financial Statements.
Enterprise Funds
36
37
NOTES TO BASIC
FINANCIAL STATEMENTS
City of San Mateo
Notes to Basic Financial Statements
For the year ended June 30, 2004
38
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements of the City of San Mateo, California ( City) have been prepared in conformity
with generally accepted accounting principles ( GAAP) as applied to governmental agencies. The
Governmental Accounting Standards Board ( GASB) is the accepted standard setting body for establishing
governmental accounting and financial reporting principles. The more significant of the City’s accounting
policies are described below.
A. Financial Reporting Entity
The City of San Mateo ( City) was incorporated as a charter city on September 4, 1894; the current charter
was adopted in 1971. The City operates under the Council- Manager form of government and provides
the following services: public safety, including police and fire; building inspection; parks and streets;
sanitation; leisure services; planning and zoning; general administration services; and redevelopment.
As required by GAAP, these basic financial statements present the City and its component units, entities
for which the City is considered to be financially accountable. Blended component units, although
legally separate entities are, in substance, part of the City’s operations and data from these units are
combined with data of the City. Each blended component unit has a June 30 year- end. The City had no
discretely presented component units. The following entities are reported as blended component units:
The San Mateo Redevelopment Agency ( Agency) was created in 1969, pursuant to the State of
California Health and Safety Code, Section 33000. The purpose is to engage in the economic
revitalization and redevelopment of areas in the City determined to be in decline. The Agency is
controlled by the City and has the same governing board as the City, which also performs all
accounting and administrative functions for the Agency. The Agency’s financial activities have been
aggregated and merged (“ blended”) with those of the City in the accompanying basic financial
statements in the Redevelopment Agency Housing Special Revenue Fund, the Redevelopment
Agency Debt Service Fund and the Redevelopment Agency Capital Projects Fund.
The San Mateo Joint Power Financing Authority ( Authority) was established solely to assist the City
in the issuance of certain enterprise fund revenue bonds. It is controlled by and financially
dependent on the City; its financial activities were accounted for as part of the respective enterprise
funds.
The Agency’s financial statements, as well as financial information relating to the Authority can be
obtained from the City of San Mateo at 330 West 20th Avenue, San Mateo, CA 94403- 1388.
B. Basis of Accounting and Measurement Focus
The accounts of the City are organized on the basis of funds, each of which is considered a separate
accounting entity with its own self- balancing accounts that comprise its assets, liabilities, fund equity,
revenues and expenditures or expenses. These funds are established for the purpose of carrying out
specific activities or certain objectives in accordance with specific regulations, restrictions or limitations.
Governmental resources are allocated to and accounted for in individual funds based upon the
purposes for which they are to be spent and the means by which spending activities are controlled.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
39
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
B. Basis of Accounting and Measurement Focus, Continued
Government- Wide Financial Statements
The City Government- Wide Financial Statements include a Statement of Net Assets and a Statement of
Activities and Changes in Net Assets. These statements present summaries of Governmental and
Business- Type Activities for the City accompanied by a total column.
The basic financial statements are presented on an “ economic resources” measurement focus and the
accrual basis of accounting. Accordingly, all of the City’s assets and liabilities, including capital assets,
as well as infrastructure assets, and long- term liabilities, are included in the accompanying Statement of
Net Assets. The Statement of Activities presents changes in net assets. Under the accrual basis of
accounting, revenues are recognized in the period in which they are earned while expenses are
recognized in the period in which the liability is incurred.
Certain types of transactions reported as program revenues for the City are reported in three categories:
• Charges for services
• Operating grants and contributions
• Capital grants and contributions.
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 and the business-type
activities, which are presented as internal balances and eliminated in the total primary government
column. In the Statement of Activities, internal fund transactions have been eliminated; however, those
transactions between governmental and business- type activities have not been eliminated. The
following interfund activities have been eliminated:
• Due to/ from other funds
• Transfers in/ out
The City applies all applicable GASB pronouncements ( including all NCGA Statements and
Interpretations currently in effect) as well as the following pronouncements issued on or before
November 30, 1989 to the business type activities, unless those pronouncements conflict with or
contradict GASB pronouncements: Financial Accounting Standards Board ( FASB) Statements and
Interpretations, Accounting Principles Board ( APB) Opinions, and Accounting Research Bulletins ( ARB)
of the committee on Accounting Procedure. The City applies all applicable FASB Statements and
Interpretations issued after November 30, 1989 except those that conflict with or contradict GASB
pronouncements.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
40
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
B. Basis of Accounting and Measurement Focus, Continued
Governmental Fund Financial Statements
Governmental fund financial statements include a Balance Sheet and a Statement of Revenues,
Expenditures and Changes in Fund Balances for all major governmental funds and non- major funds
aggregated. An accompanying schedule is presented to reconcile and explain the differences in net
assets as presented in these statements to the net assets presented in the government- wide financial
statements. The City has presented all major funds that met those qualifications.
All governmental funds are accounted for on a spending or “ current financial resources” measurement
focus and the modified accrual basis of accounting. Accordingly, only current assets and current
liabilities are included on the balance sheets. The Statement of Revenues, Expenditures and Changes in
Fund Balances present increases ( revenues and other financing sources) and decreases ( expenditures
and other financing uses) in net current assets. Under the modified accrual basis of accounting,
revenues are recognized in the accounting period in which they become both measurable and available
to finance expenditures of the current period.
Revenues are recorded when received in cash, except that revenues subject to accrual ( generally 60 days
after year- end) are recognized when due. The primary revenue sources, which have been treated as
susceptible to accrual by the City, are property tax, taxpayer- assessed tax revenues ( sales taxes, transient
occupancy taxes franchise taxes, etc.), grant revenues and earnings on investments. Expenditures are
recorded in the accounting period in which the related fund liability is incurred.
The Reconciliation of the Fund Financial Statements to the Government- Wide Financial Statements is
provided to explain the differences created by the integrated approach of GASB Statement No. 34.
Proprietary Fund Financial Statements
Proprietary fund financial statements include a Statement of Net Assets, a Statement of Revenues,
Expenses and Change in Net Assets, and a Statement of Cash Flows for all proprietary funds.
A column representing internal service funds is also presented in these statements. However, internal
service balances and activities have been combined with the governmental activities in the government-wide
financial statements.
Proprietary funds are accounted for using the “ economic resources” measurement focus and the accrual
basis of accounting. Accordingly, all assets and liabilities ( whether current or noncurrent) are included
on the Statement of Net Assets. The Statement of Revenues, Expenses and Change in Fund Net Assets
presents increases ( revenues) and decreases ( expenses) in total net assets. Under the accrual basis of
accounting, revenues are recognized in the period in which they are earned while expenses are
recognized in the period in which liability is incurred.
Operating revenues in the proprietary funds are those revenues that are generated from the primary
operations of the fund. All other revenues are reported as nonoperating revenues. Operating expenses
are those expenses that are essential to the primary operations of the fund. All other expenses are
reported as nonoperating expenses.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
41
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
B. Basis of Accounting and Measurement Focus, Continued
Fiduciary Fund Financial Statements
The City has no fiduciary funds.
C. Cash, Cash Equivalents and Investments
The City pools cash resources of its various funds to facilitate cash management. Cash in excess of
current requirements is invested and reported as investments. It is the City’s intent to hold of current
investments until maturity. However, the City may, in response to market conditions, sell investments
prior to maturity in order to improve the quality, liquidity or yield of the portfolio. Interest earnings are
apportioned among funds based on ending accounting period cash and investment balances.
The City’s cash and cash equivalents are considered to be cash on hand, demand deposits, and highly
liquid investments with original maturity of three months or less from the date of acquisition.
In accordance with GASB Statement No. 40, Deposit and Investment Disclosures ( Amendment of GASB No.
3), certain disclosure requirements for Deposits and Investment Risks were made in the following areas:
􀂃 Interest Rate Risk
􀂃 Credit Risk
􀂉 Overall
􀂉 Custodial Credit Risk
􀂉 Concentrations of Credit Risk
In addition, other disclosures are specified including use of certain methods to present deposits and
investments, highly sensitive investments, credit quality at year- end and other disclosures.
In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and
for External Investment Pools, highly liquid market investments with maturities of one year or less at time
of purchase are stated at amortized cost. All other investments are stated at fair value. Market value is
used as fair value for those securities for which market quotations are readily available.
The City participates in the Local Agency Investment Fund ( LAIF), an investment pool managed by the
State of California. LAIF has invested a portion of the pool funds in Structured Notes and Asset- Backed
Securities. LAIF’s investments are subject to credit risk with the full faith and credit of the State of
California collateralizing these investments. In addition, these Structured Notes and Asset- Backed
Securities are subject to market risk as a result of changes in interest rates.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
42
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
D. Restricted Cash and Investments
Certain restricted cash and investments are held by fiscal agents for the redemption of bonded debt and
for acquisition and construction of capital projects. Cash and investments are also restricted for
deposits held for others within the enterprise funds.
E. Prepaids and Supplies
Certain payments to vendors reflect costs applicable to future accounting periods. Supplies are valued
at cost on a first- in first- out basis. Supplies in the General Fund consists of expendable supplies held for
consumption by all departments of the City. The cost is recorded as an expenditure at the time
individual inventory items are withdrawn for use ( consumption method). The General Fund supplies
amount is equally offset by a fund balance reservation, which indicates that it does not constitute
expendable available financial resources. Supplies in the enterprise funds consist principally of
materials and supplies for utility operations and are expensed as consumed.
F. Property Held for Resale
Property held for resale consists of land and project costs relating to property acquired or constructed
which will be sold under terms of disposition and development agreements between the Agency and
developers. The property held for resale is recorded at the lower of cost or estimated net realizable
value. Reported amounts are fully reserved, which indicates that they do not constitute available
spendable resources.
G. Capital Assets
Capital assets, which include land, buildings, improvements, equipment, furniture, and infrastructure
assets ( e. g. roads, sidewalks, and similar items), are reported in the applicable governmental or
business- type activities in the Government- Wide Financial Statements. Capital assets are recorded at
historical cost or estimated historical cost if actual cost in not available. Donated assets are valued at
their estimated fair value on the date donated.
City policy has set the capitalization threshold for reporting capital assets at the following:
General Capital Assets $ 10,000
Infrastructure Capital Assets $ 100,000
For capital assets, depreciation is recorded on a straight- line basis over the useful lives of the assets as
follows:
Sewer Treatment Plant and Transmission Lines 60 years
Buildings and Improvements 20 - 25 years
Machinery and Equipment 3 – 15 years
Infrastructure 25 – 50 years
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
43
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
G. Capital Assets, Continued
The Governmental Accounting Standards Board ( GASB) issued Statement No. 34 requires the inclusion
of infrastructure capital assets in local governments’ basic financial statements. In accordance with
Statement No. 34, the City has included the value of all infrastructure into its Basic Financial Statements.
The City defines infrastructure as the basic physical assets that allow the City to function. The assets
include:
• Streets system
• Site amenities such as parking and landscaped areas used the City in the conduct of its
business
Each major infrastructure system can be divided into subsystems. For example, the street system can be
subdivided into pavement, curb and gutters, sidewalks, medians, streetlights, traffic control devices
( signs, signals and pavement markings), landscaping and land. These subsystems were not delineated
in the Basic Financial Statements. The appropriate operating department maintains information
regarding the subsystems.
The City elected to use the Basic Approach as defined by GASB Statement No. 34 for infrastructure
reporting. The City conducted a valuation of its infrastructure assets as of July 1, 2002. This valuation
determined the original cost using one of the following methods:
1. Use of historical records where available.
2. Standard unit costs appropriate for the construction/ acquisition date.
3. Present cost indexed by a reciprocal factor of the price increase from the
construction/ acquisition date to the current date.
The accumulated depreciation, defined as the total depreciation from the date of
construction/ acquisition to the current date on a straight line method using industry accepted life
expectancies for each infrastructure subsystem. The book value was then computed by deducting the
accumulated depreciation from the original cost.
Interest accrued during capital assets construction, if any, is capitalized for the business- type and
proprietary funds as part of the asset cost.
H. Interest Payable
In the government- wide financial statements, interest payable of long- term debt is recognized as the
liability is incurred for governmental fund types and proprietary fund types.
In the fund financial statements, propriety fund types recognize the interest payable when the liability is
incurred.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
44
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
I. Deferred Revenue
In the Government- Wide Financial Statements, deferred revenue is recognized for transactions for
which revenue has not yet been earned. Typical transactions recorded as deferred revenues in the
Government- Wide Financial Statements are prepaid charges for services.
In the Fund Financial Statements, deferred revenue is recorded when transactions have not yet met the
revenue recognition criteria based on the modified accrual basis of accounting. The City records
deferred revenue for transactions for which revenues have not been earned, or for which funds are not
available to meet current financial obligations. Typical transactions for which deferred revenue is
recorded are grants received but not yet earned or available, long- term loans receivables, and prepaid
charges for services.
J. Claims and Judgments
The short- term and long- term workers’ compensation claims liability is reported in the Workers’
Compensation Insurance Internal Service Fund. The short- term and long- term general claims liability is
reported in the Comprehensive Liability Insurance Internal Service Fund. The short- term liability
which will be liquidated with current financial resources is the amount of settlement reached, but unpaid,
related to claims and judgments entered.
K. Long- Term Debt
Government- Wide Financial Statements - Long- term debt and other long- term obligations are reported as
liabilities in the appropriate activities.
Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the
bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium
or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the
related debt.
Fund Financial Statements - The fund financial statements do not present long- term debt but are shown in
the Reconciliation of the Governmental Funds Balance Sheet to the Government- Wide Statement of Net
Assets.
Bond premiums and discounts, as well as issuance costs, are recognized during the current period.
Bond proceeds are reported as other financing sources net of the applicable premium or discount.
Issuance costs, whether or not withheld from the actual net proceeds received, are reported as debt
service expenditures.
Proprietary Fund Financial Statements use the same principles as those used in the Government- Wide
Financial Statements.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
45
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
L. Property Taxes
San Mateo County ( County) assesses properties and it bills, collects, and distributes property taxes to all
taxing entities including the City. Under State law, known as the Teeter Plan, the County remits the
entire amount levied and handles all delinquencies, retaining interest and penalties. Secured and
unsecured property taxes are levied on January 1.
Secured property tax is due in two installments, on November 1 and March 1, and becomes a lien on
those dates. It becomes delinquent on December 10 and April 10, respectively. Unsecured property tax
is due on July 1, and becomes delinquent on August 31. Collection of delinquent accounts is the
responsibility of the County, which retains all penalties.
The term “ unsecured” refers to taxes on personal property other than real estate, land and buildings.
These taxes are secured by liens on the property being taxed. Property tax revenues are recognized by
the City in the fiscal year they are levied, provided they become available as defined above.
M. Net Assets
Government- Wide Financial Statements
Invested in Capital Assets, Net of Related Debt – This amount consists of capital assets net of
accumulated depreciation and reduced by outstanding debt that attributed to the acquisition,
construction, or improvement of the assets.
Restricted Net Assets – This amount is restricted by external creditors, grantors, contributors, or
laws or regulations of governments.
Unrestricted Net Assets – This amount is all net assets that do not meet the definition of “ invested in
capital assets, net of related debt” or “ restricted net assets” as defined above.
Fund Financial Statements
Reservations of fund balances of governmental funds and retained earnings of proprietary funds are
created to either satisfy legal covenants; including State laws, that require a portion of the fund equity
be segregated or identify the portion of the fund equity not available for future expenditures.
N. Use of Restricted/ Unrestricted Net Assets
When an expense is incurred for purposes for which both restricted and unrestricted net assets are
available, the City’s policy is to apply restricted net assets first.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
46
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
O. Use of Estimates
The preparation of the basic financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities. In addition, estimates affect the reported amount of expenses. Actual results could differ
from these estimates and assumptions.
P. Implementation of New GASB Pronouncements
In 2004, the City adopted a new accounting standard in order to conform to the following
Governmental Accounting Standards Board Statements:
􀂾 Statement No. 40, Deposit and Investment Disclosures ( Amendment of GASB No. 3)
2. CASH AND INVESTMENTS
The City maintains a cash and investment pool for all funds. Certain restricted funds which are held and
invested by independent outside custodians through contractual agreements are not pooled. These
restricted funds include cash and investment held by trustees.
A. Deposits
The carrying amounts of the City’s cash deposit were $ 525,061 at June 30, 2004. Bank balances before
reconciling items were $ 626,404 at June 30, 2004, the total amount of which was insured and/ or
collateralized with securities held by the pledging financial institutions in the City’s name as discussed
below.
The California Government Code requires California banks and savings and loan associations to secure the
City’s cash deposits by pledging securities as collateral. This 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 deposits is considered to be held in the City's name.
The market value of pledged securities must equal at least 110% of the City’s cash deposits. California law
also allows institutions to secure City deposits by pledging first trust deed mortgage notes having a value
of 150% of the City’s total cash deposits. The City may and has waive collateral requirements for cash
deposits, which are fully insured up to $ 100,000 by the Federal Deposit Insurance Corporation.
The City follows the practice of pooling cash and investments of all funds, except for funds required to be
held by fiscal agents under the provisions of bond indentures. Interest income earned on pooled cash and
investments is allocated on an accounting period basis to the various funds based on the period- end cash
and investment balances. Interest income from cash and investments with fiscal agents is credited directly
to the related fund.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
47
2. CASH AND INVESTMENTS, Continued
B. Investments
Under the provisions of the City’s investment policy, and in accordance with California Government Code,
the following investments are authorized:
Maximum Maximum
Maximum Percentage of Investment in
Authorized Investment Type Maturity Portfolio One Issuer
Securities issued by the U. S. Treasury 5 years No limit No limit
U. S. Agency Securities 5 years 25% per Agency 25% of porfolio
Banker's acceptances 180 days 40% 5% of portfolio
Non- negotiable certificates of deposit 3 years 25% 10% of portfolio
Negotiable certificates of deposit 5 years 30% 5% of portfolio
Repurchase agreements 90 days 10% 5% of portfolio
Local Agency Investment Fund N/ A 65% 65% of portfolio
San Mateo County Pool N/ A 30% 30% of porfolio
Money Market/ Mutual Funds N/ A 5% 5% of portfolio
In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and
for External Investment Pools, investments were stated at fair value using the aggregate method in all
funds and component units, resulting in the following investment income in all funds and component
units:
Interest income $ 2,001,536
Unrealized loss in changes in
fair value of investments ( 1,399,471)
Total investment income $ 602,065
The City portfolio value fluctuates in an inverse relationship to any change in interest rate.
Accordingly, if interest rates have risen, the portfolio value will have declined. If interest rates have
fallen, the portfolio value will have risen. In accordance with GASB Statement No. 31, the portfolio for
year- end reporting purposes is treated as if it were all sold. Therefore, fund balance must reflect the
portfolio’s change in value. These portfolio value changes are unrealized unless sold. The City’s policy
is to buy and hold investments until maturity dates.
The City’s investments are carried at fair value as required by generally accepted accounting principles.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
48
2. CASH AND INVESTMENTS, Continued
B. Investments, Continued
The City is a voluntary participant in the Local Agency Investment Fund ( LAIF) that is regulated by
California Government Code Section 16429 under the oversight of the Treasurer of the State of California.
The City’s investments with LAIF at June 30, 2004, include a portion of the pool funds invested in
Structured Notes and Asset- Backed Securities. These investments include the following:
Structured Notes - are debt securities ( other than asset- backed securities) whose cash flow
characteristics ( coupon rate, redemption amount, or stated maturity) depend upon one or more indices
and/ or that have embedded forwards or options.
Asset- Backed Securities, the bulk of which are mortgage- backed securities, entitle their purchasers to
receive a share of the cash flows from a pool of assets such as principal and interest repayments from a
pool of mortgages ( such as Collateralized Mortgage Obligations) or credit card receivables.
As of June 30, 2004, the City had $ 50,613,086 invested in LAIF, which had invested 1.603% of the pool
investment funds in Structured Notes and Asset- Backed Securities. The LAIF fair value factor of
0.998384177 was used to calculate the fair value of the investments in LAIF.
The City is also a voluntary participant in the San Mateo County Investment Fund ( County Pool) that is
regulated by California Government Code Section 16429 under the oversight of the Treasurer of the
County of San Mateo. The City reports its investment in the County Pool at the fair value amount
provided by the County. The balance available for withdrawal is based on the accounting records
maintained by the County Pool, which are recorded on an amortized cost basis. Included in the County
Pool’s investment portfolio are US Treasury Notes, Obligations issued by agencies of the United States
Government, LAIF, Corporate Notes, Commercial Paper, collateralized mortgage obligations,
mortgage- backed securities, other asset- backed securities, and floating rate securities issued by federal
agencies, government- sponsored enterprises, and corporations.
C. Summary of Cash and Investments
The following is a summary of cash and investments at June 30, 2004:
Governmental Business- Type
Activities Activities Total
Cash and Investments $ 7 8,701,363 $ 18,244,661 $ 96,946,024
Restricted Cash and
Investments $ 5 4,339,504 $ 22,072,359 $ 76,411,863
Government- Wide Statement of Net Assets
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
49
2. CASH AND INVESTMENTS, Continued
C. Summary of Cash and Investments, Continued
At June 30, 2004, the City had the following deposits and investments:
Fitch Moody's S& P Fair Value
City Treasury:
Deposits P- 1 A1 $ 5 25,061
Investments:
Time Deposit of Certificates 6 00,000
Securities of U. S. Government Agencies:
FFCB Aaa AAA 3 ,937,510
FHLB Aaa AAA 8 ,832,190
FHLMC Aaa AAA 1 ,976,040
FNMA Aaa AAA 2 ,962,190
Total Securities of U. S. Government Agencies 1 7,707,930
Local Agency Investment Funds 5 0,613,086
San Mateo County Pool AA/ V1 2 6,399,947
Money Market Funds Aaa AAA 1 ,100,000
Total investments 9 6,420,963
Total City Treasury 9 6,946,024
Restricted Cash and Investments:
Cash with fiscal agents 7 6,411,863
Total restricted cash and investments 7 6,411,863
Total cash and investments $ 1 73,357,887
Credit Quality Ratings
B or better, if applicable
Not Rated
Not Rated
D. Risk Disclosures
Interest Rate Risk: As a means of limiting its exposure to fair value losses arising from rising interest rates,
the City’s investment policy limits are as follows:
Maturity Maximum Investment
Up to six months 25%
Six months to five years 75%
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
50
2. CASH AND INVESTMENTS, Continued
D. Risk Disclosures, Contiued
Investments held in the City Treasury grouped by maturity date at June 30, 2004, are shown below:
Maturity Investment
Up to One year $ 78,713,033
From One to Three years 17,707,930
Total $ 96,420,963
Custodial Credit Risk: For an investment, custodial credit risk is the risk that, in the event of the failure of the
counterparty, the City will not be able to recover the value of its investments or collateral securities that are
in the possession of an outside party. Of the City’s investments, $ 17,707,930 of securities was held by the
investment’s counterparty in the name of the City.
Credit Risk. Credit risk is the risk that a security or a portfolio will lose some or all of its value due to a
real or perceived change in the ability of the issuer to repay its debt. According to the City’s investment
policy, no more than 5% of the total portfolio may be invested in securities of any single issuer, other
than the US Government, its agencies and instrumentalities, San Mateo County Pool and LAIF. If a
security is downgraded by either Moody’s or S& P to a level below the minimum quality required by the
City, it shall be the City’s policy to sell that security as soon as practicable.
3. INTERFUND TRANSACTIONS
A. Due To/ From Other Funds
At June 30, 2004, the City had the following due to/ from other funds:
General
Due To Other Funds Fund Total
Non- major Governmental Funds $ 84,635 $ 84,635
Due From Other Funds
The amounts due to the general fund from other funds represent reclassified temporary negative cash
balances pending grant reimbursements or other receivable. Current interfund balances arise in the
normal course of operations and are expected to be repaid shortly after the end of the fiscal year.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
51
3. INTERFUND TRANSACTIONS, Continued
B. Transfers
At June 30, 2004, the City had the following transfers in/ out which arise in the normal course of
operations.
General Non- Major
Projects Governmental Internal
General Capital Projects Funds Service Funds Total
Major Funds:
General $ - $ 3 ,400,000 $ - $ 1 ,500,000 $ 4 ,900,000
Non- major Governmental Funds 1 ,515,000 6 ,405,356 1 60,000 - 8 ,080,356
Internal Service Fund 1 ,000,000 - - - 1 ,000,000
Total $ 2 ,515,000 $ 9 ,805,356 $ 1 60,000 $ 1 ,500,000 $ 1 3,980,356
Transfers In
Transfers Out
Transfers from the general fund to the capital projects fund represent the general fund funding capital
projects mainly for streets, parks, and building component replacement.
Transfers from the solid waste fund to the capital projects are for the third avenue landfill closure.
Transfers from the CDBG fund to the capital projects fund are for CDBG eligible projects.
Transfers from gas tax fund to the general fund are for street related expenditures in the general fund.
Transfers from the general fund to the internal service funds are for the purpose of bringing the funding
levels in those funds to the policy level.
Transfers from the construction services fund to the capital projects fund are for the development
review software acquisition and implementation.
Transfers from the construction services fund to the capital projects fund are for the development
review software acquisition and implementation.
Transfers from the 2% hotel tax fund to the capital projects fund are for the new police station project.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
52
4. LOANS AND NOTES RECEIVABLE
A. Government- Wide Financial Statements
At June 30, 2004 the City’s loans and notes receivable consisted of the following:
Loans and notes receivable $ 37,767,855
Allowances for potential forgiveness ( 8,242,619)
Loans and notes receivable, net $ 29,525,236
B. Fund Financial Statements
The City and the Agency engage in programs designed to encourage construction or improvement in low-to-
moderate income housing or other projects. Under these programs, loans are provided under favorable
terms to homeowners or developers who agree to spend these funds in accordance with the City’s and
Agency’s terms. In the governmental fund financial statements, these loans have been offset by deferred
revenue or a reservation of fund balance as they are not expected to be repaid immediately.
Loans and notes receivable, including accrued interest and related deferred revenue, comprised balances
from the following programs, all of which are discussed below:
Balance Balance
Description Year Due June 30, 2004 June 30, 2003
Governmental Funds:
First- Time Homebuyer Loans Various $ 1 5,577,856 $ 1 5,919,901
Home Rehabilitation Loans Various 2 ,632,735 2 ,602,589
106 N. Eldorado 2036 4 50,000 4 50,000
Darcy Building 2040 1 ,500,000 1 ,500,000
Edgewater Isle Senior Apartments 2048 3 ,156,625 3 ,074,866
Belmont Building 2032 8 00,000 8 00,000
Merkel Building 2005/ 2011 6 7,185 8 6,763
St. Matthew Hotel 2036 2 ,208,150 2 ,176,928
Rotary Hacienda 2058 3 ,683,458 2 ,197,019
Turning Point 2018 9 68,600 5 66,863
12 N. Idaho Street 2034 1 10,436 1 10,436
200 S. Delaware Street 2049 1 ,433,160 1 ,395,180
Employees' Housing Assistance Program Various 8 9,117 8 8,387
232 S. Humboldt Street 2021 5 50,000 5 35,000
11 S. Delaware Street 2032 5 43,385 3 74,907
El Camino Family Housing 2042 3 ,541,573 3 ,439,990
Total governmental funds 3 7,312,280 3 5,318,829
Internal Service Funds:
Employee Loan Open 4 55,575 4 55,575
Total $ 3 7,767,855 $ 3 5,774,404
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
53
4. LOANS AND NOTES RECEIVABLE
B. Fund Financial Statements, Continued
First- Time Homebuyer Loans
The Redevelopment Agency has provided various loan programs for First Time Homebuyers since 1989. In
general they provide secondary financing for low and moderate buyers in the City of San Mateo that have
deferred payments in order to allow the buyer to maximize their purchasing capacity. The various loan
terms are described below:
Gateway Commons Original Buyers - Second loans up to $ 45,000 accrue interest that compounds
annually. Payment of principal and interest is paid upon sale of property. Units are sold at market
value and the Agency also receives as payment a share of the appreciation based on the percentage of
the Agency loan to original purchase price. The Agency has first right of refusal to purchase unit to roll
over to new eligible buyer.
First Time Buyer Resale Program - Subsequent buyers at Gateway Commons and other first time buyer
complexes have different loan terms: Second loans up to $ 60,000 accrue interest that is compounded
annually. The resale price is restricted by applying the percentage increase in median income from the
time of the purchase date to the sale date, to the initial sales price. The Agency has the first right of
refusal to roll unit to new eligible at the restricted sales price. The principal is repaid, but payment of
the accrued interest is waived. If the Agency does not exercise option to purchase, the unit can be sold
at fair market value to a non- eligible buyer. In this case the principal, interest and appreciation share
payment is paid to the Agency.
Neighborhood Purchase Program - A second loan of up to 20% of the purchase price, or maximum of
$ 60,000 accrues simple interest of 3% per year. This is an amortized loan where monthly payments are
deferred for five years and then repaid over 25 years. This program is no longer active. There are no
resale price restrictions.
CASA Program - Secondary funds of up to 20% of the purchase price, or maximum of $ 60,000 are
available from a partnership between the Agency and the program lender, City National Bank. Buyers
obtain a first loan with the bank. The bank and the Agency each provide half of the secondary funds in
second and third position respectively. Loan repayment is deferred until sale or refinance, at which
time the original loan, plus a percentage of the appreciation is distributed to the Agency and the bank.
This program is no longer active. There are no resale price restrictions.
Countywide Home Investment Partnership ( CHIP) Program - This program provides a second loan of
up to 20% of the purchase price, or maximum of $ 60,000. No interest and no payments are due for 10
years. Then payments are amortized at 4% for 25 years. Upon sale of the property or refinance, an
appreciation share payment is due to the Agency. This program is designed to partner with other local
secondary loan programs, such as the Community College District program that provides the same loan
terms, only the interest and payments are deferred for five years. There are no resale price restrictions.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
54
4. LOANS AND NOTES RECEIVABLE, Continued
B. Fund Financial Statements, Continued
Meadow Court Program - This program provides first- time homebuyers down payment assistance in an
amount not to exceed $ 60,000 for the purchase of units at Meadow Court. The loans are secured by a
second deed of trust to eligible homebuyers who obtain a conventional mortgage from a private lender.
The original term of the loan is 40 years with an interest rate varying between 4% and 10%. At year 31,
provided that the property has not been sold or transferred, 10% of principal and interest will be
forgiven each year until year 40, at which time the entire note is forgiven.
At June 30, 2004, the balances of all First- Time Homebuyer loans amounted to $ 15,577,856.
Home Rehabilitation Loans
The City administers various housing rehabilitation loan programs using Community Development Block
Grant funds, Redevelopment Agency Housing Set- Aside funds and City Housing funds. Under these
Programs, individuals with incomes below a certain level are eligible to receive low interest, variable term
loans, secured by deeds of trust for rehabilitation work on their homes. The maximum loan limit is $ 85,000
and $ 100,000 for historic properties. The loan repayments may be amortized over the life of the loans,
deferred or a combination of both.
106 N. Eldorado
The City loaned $ 450,000 to Housing Association for the Needy and Dispossessed, Inc. ( HAND), a non-profit
organization, to acquire and rehabilitate six apartment units at 106 N. Eldorado for low- income
housing. The loan bears no interest and is due in 40 years. If the property has not been sold or transferred,
beginning in 2027, ten percent of the principal will be forgiven annually until 2036, at which time the entire
loan principal will be forgiven.
Darcy Building
On June 30, 2000, the City and the Agency had made four loans, the proceeds of which were used to
conduct substantial rehabilitation and residential conversion of the Darcy Building for low income
households. The loans carry interest at rates which vary from 0% to 5% with a term of 30 years. If the
property remains in the developer’s hands, two of the loans allow partial forgiveness beginning in year 30,
with full forgiveness in year 40.
Edgewater Isle Senior Apartments
On June 30, 2000, the City and the Agency had a receivable from the Human Investment Project for the
purchase and minor rehabilitation of ninety- two low and moderate income senior rental units at Edgewater
Isle. Payments of principal and 3% interest are deferred until 2048 or the sale or transfer of the property.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
55
4. LOANS AND NOTES RECEIVABLE, Continued
B. Fund Financial Statements, Continued
Belmont Building
On June 30, 2000, the City and the Agency had made two loans, the proceeds of which were used to convert
this building into six one- bedroom units for very low income families. The loans bear no interest and are
for a term of 40 years. If the property remains in the developer’s hands, beginning in year 2023, ten percent
of the principal will be forgiven annually until year 2032, at which time the entire loan principal will have
been forgiven.
Merkel Building
The Agency holds a loan and second deed of trust in the amount of $ 100,000 at 5% interest for the
rehabilitation and historic preservation of the Merkel Building. Payments on the loan, which was made in
1995, were deferred until 2000 and will be paid in full by 2012.
St. Matthew Hotel
On June 30, 2000, the City and the Agency had a receivable from a developer, which used these funds to
rehabilitate this hotel into a single room occupancy development for very low- income households. Interest
is at 0% to 3%; principal and interest are due in 2036. Annual payments on the 3% loan are based on
available cash flow, if any.
Rotary Hacienda
In 1998, the Agency entered into a Development and Disposition Agreement with Rotary Hacienda Inc. for
the construction and operation of an 82- unit senior rental housing project. The Agreement includes a
promissory note in the amount of $ 968,383, which bears simple interest at a rate of 8.75% compounded
annually, and is due on December 30, 2028.
In 2003, the Agency entered into two Predevelopment Loan Agreements with Rotary Hacienda Inc. for the
purchase of land and predevelopment of the Rotary Floritas Apartments project. The Agreement includes
two promissory notes in the amount of $ 1,800,000 and $ 1,200,000, which bears 0% interest rate and a simple
interest at 3.00% compounded annually, respectively. Both Agreements are due on October 30, 2058.
Turning Point
On June 26, 1988, the Agency and the Mid- Peninsula Coalition Belle Haven, Inc., entered into an agreement,
which provided loans of $ 69,262 in City funds and $ 305,000 in Agency funds to assist with the acquisition
and development of an emergency housing shelter called Turning Point. The loan bears no interest and is
due in 2018; however, repayment is not required as long as the facility remains a shelter.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
56
4. LOANS AND NOTES RECEIVABLE, Continued
B. Fund Financial Statements, Continued
12 N. Idaho Street
In 1994, HAND, Inc., a non- profit organization, received loans of $ 100,000 from the Agency and $ 10,436
from the City to assist in the purchase of a six- unit apartment building located at 12 N. Idaho Street to be
used as an affordable housing complex. The Agency loan carries an interest rate of 10% and is for a period
of 40 years and the City loan carries no interest and is for a period of 15 years. Principal payments on both
loans are deferred until the earlier of sale or transfer of the property or the maturity date.
200 S. Delaware Street
On October 6, 1999, the City and the Agency loaned $ 1,216,000 to Housing Association for the Needy and
Dispossessed, Inc. ( HAND) to acquire and rehabilitate sixteen units at 200 S. Delaware Street for low-income
housing. The loan bears an interest rate of 3%. Principal and interest are due in 2049. However,
HAND has an option of renewing the loan agreement for another fifty years.
Employees’ Housing Assistance Program
The City has a housing assistance program for City employees for housing located within San Mateo City
limits. This program provides short- term loans up to $ 75,000 to finance rental deposits or closing costs for
home ownership. Loan repayments are deducted from employees’ paychecks over a period of up to five
years or are due upon leaving employment.
232 S. Humboldt Street
On February 9, 2001, the City and the Agency loaned $ 500,000 to Mateo Lodge, Inc., to rehabilitate nine
units at 232 S. Humboldt Street for low- income housing. The loan bears an interest rate of 3%. Principal
and interest are due in 2021. However, Mateo Lodge, Inc. has an option of renewing the loan agreement for
another twenty years.
11 S. Delaware Street
On June 17, 2002, the City loaned $ 660,000 to HAND to acquire and rehabilitate eleven units at 11 S.
Delaware Street for affordable housing. The loan bears an interest rate of 3%. Principal and interest are due
in 2032. However, HAND has an option of renewing the loan agreement for another thirty years.
El Camino Family Housing
In December 2002, El Camino Family Housing, L. P., received a loan of $ 3,386,000 from the Agency to
develop the Santa Inez Apartments which is to be used as an affordable housing complex. The Agency loan
carries an interest rate of 3% and is for a period of 40 years. Annual payments of principal and interest in
the amount of $ 140,688 from the borrower’s “ available cash flow” will be required annually. In the event
the “ available cash flow” is inadequate to remain current, the loan shall nevertheless be due and payable in
40 years.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
57
4. LOANS AND NOTES RECEIVABLE, Continued
B. Fund Financial Statements, Continued
Employee Loan
In March 2003, a newly appointed city employee received a loan of $ 455,575 from the City to assist with
obtaining suitable housing. The City and Employee agreed to hold title to the property purchased as an
investment and for use as a personal residence by Employee and his family. The agreement will terminate
upon whichever of the following events shall first occur: ( 1) Termination of the employment relationship
between the City and Employee by either party. ( 2) The death of Employee. ( 3) The failure by Employee to
occupy said Property as his principal place of residence for a period of ninety consecutive days. The City
and Employee will share in the profits and losses of the property at 52.6% and 47.4%, respectively.
5. DEFERRED REVENUE
A. Government- Wide Financial Statements
Deferred revenues in Government- Wide Financial Statements represent amounts for which revenues
have not been earned. At June 30, 2004, deferred revenues in the Government- Wide Financial
Statements were as follows:
Governmental
Activities
Prepaid summer course registration $ 6 97,654
Prepaid recreation classes 4 1,727
Unearned grant revenues 2 29,106
Total $ 9 68,487
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2004
58
5. DEFERRED REVENUE, Continued
B. Fund Financial Statements
At